Political risk returns to sterling

On Monday morning the pound was in an upbeat mood. It took in its stride the resignation of Brexit minister David Davis and one of his sidekicks, whose name was unfamiliar to most investors. The resignation of Boris Johnson as foreign minister was a different matter: sterling dropped a cent.

Have never had particular emotional attachment to Mr Johnson. Little that he said or did during his tenure as foreign secretary was conspicuously positive for the pound. However, to paraphrase Oscar Wilde: to lose one minister may be regarded as a misfortune; to lose two looks like carelessness. It was the loss of Mr Johnson from the cabinet, not the loss of his talented input, that caused investors to mark down the pound.

The concern was, and will remain, that the prime minister's position has been put at risk by the resignations. Although the word in Westminster is still that she would survive a confidence vote, the chance of that vote taking place has been increased by Mr Johnson's departure. Sterling lost a third of a euro cent and was down by a similar proportion - 0.3% - on average.

What trade war?
Bearing in mind sterling's difficult day, consider the fate of the "safe-haven" currencies. The Swiss franc was unchanged against the pound and the Japanese currency was a quarter of a yen lower. With no new US trade sanctions appearing on Twitter, investors had put risk to the back of their minds.

Even the European Central Bank president was in ebullient mood when he addressed the European Parliament. Inflation is on track for its almost-two-per-cent target and the main downside risks to the economy relate to trump's trade war.  

Things were looking less rosy to the southeast. One of Recep Tayyip Erdogan's first moves as executive president of Turkey was to appoint his son-in-law as finance minister. To say investors were dismayed would be an understatement. The lira lost 3% on the day to sterling; it has lost a quarter of its value in the last 12 months.

GDP monthly
Around the world, gross domestic product is almost always calculated on a quarterly basis. Today Britain's Office for National Statistics will for the first time publish a monthly figure, for May, which it says will be more timely and more accurate. There will also be a stack of UK production and trade data.

The ONS intends to release its monthly GDP figure six weeks after the end of the period. When the system has bedded in it will also publish rolling three-month data. Monthly updates should mean a smoother ride for the pound. The National Institute for Social and Economic Research (NIESR) will continue to have the jump on the ONS though; its estimate today is for the June quarter.

United Kingdom manufacturing and industrial production are supposed to have increased by 0.9% and 0.5%, respectively, in May. GDP growth for the same month is pencilled in at 0.3%.