Sterling continues to suffer

It depends how you look at it
The Daily Mail says "Property market is bouncing back": the Wall Street Journal says "UK housing puts on the Brexit brakes". Both comments relate to the RICS survey published last night. As ever, it isn't the facts that matter it's the way they are interpreted. The same applies to rate cuts.

For the second time in a fortnight a currency strengthened noticeably after a central bank lowered its benchmark interest rate by a quarter of a percentage point. The first was the Australian dollar, which has risen by 3% since the Reserve Bank of Australia acted last Tuesday. This morning it was the turn of the Reserve Bank of New Zealand. As almost universally expected, the RBNZ cut its Official Cash Rate from 2.25% to 2%. So the NZ dollar went up because the cut was not larger: 2% is still attractive in a world where the government bonds of half a dozen countries are trading at negative yields.

The Kiwi strengthened by 1.1% on the day but it was not enough to make it the market leader: that honour went to the Norwegian krone. It went up by 1.6% after consumer price index data showed inflation accelerating from 3.7% to 4.4%, scuppering the chance of a rate cut. So there is the paradox: one currency went up because of a rate cut while another went up because there will not be a rate cut.

No respite for sterling
There is nothing interpretative about investors view of the pound. They do not like it very much. Sterling was the weakest performer yesterday, as it has been on three of the last five trading days. It is down by an average of -3.3% from last Thursday morning's levels.

Wednesday's losses had a lot to do with the Bank of England's asset purchase programme and its failure to fill its buy order on Tuesday. The bank's aim is to depress interest rates and weaken the pound and Tuesday's miss helped both of those ambitions. It is having to pay a higher price for its bonds, driving yields lower: some short-term 2019 and 2020 gilts traded on negative yields yesterday.  That makes them less attractive to foreign investors, thereby reducing demand for the pound.

On the data front the only ecostat of interest to sterling was that RICS housing price balance. It was down by 11 points at 5%, therefore still slightly positive.

No numbers
Except for Swedish consumer prices there are no useful economic data today. It remains to be seen whether or not that means sterling will get an easier ride.

The inflation picture in Sweden will be very different from that of neighbouring Norway. Prices are expected to have fallen in July, taking the headline rate of inflation down from 1.0% to 0.8%.

No pan-Euroland data are scheduled. The North American figures cover Canadian new house prices, US jobless claims and US import and export prices.