The Empire strikes back

Sterling can rise as well as fall
On Tuesday it did both. In broad terms it spent the morning going nowhere, the afternoon falling out of bed, the evening sleeping on the floor and the early hours of today climbing back up towards - and in some cases beyond - yesterday's opening levels.

Shortly after lunch, and for no particular reason, investors decided to take sterling for a walk. They might not have been aiming for the lows of last Thursday night's flash crash but they headed in that direction. By early evening they had taken the pound two cents lower against the dollar and the euro, at which point they lost interest and cast it adrift.

Later in the evening the prime minister put a spoke in the bear's wheels. She unexpectedly accepted an opposition motion due for parliamentary debate today that calls for "a full and transparent debate on the government's plan for leaving the EU" and for parliament to be able to "properly scrutinize that plan". It was quite a departure from her previous stance and investors were surprised and, if not delighted, slightly reassured. The pound rebounded in the Far East to book a daily average gain of 0.4%.

Was it a U-turn?
Critics will be lining up today to describe the prime minister's decision as a U-turn; a move which, for some reason, is held to be a bad thing in politics. It was clearly not a bad thing for the pound, though, and the question now is whether sterling executed a U-turn of its own last night.

Given the pound's precipitate fall since the referendum in June, and the allegedly high level of short-sterling positions, investors must now be asking themselves whether last night's move was important enough to mark a major turning pound. If they decide it was, sterling could be in for a ten-cent correction. But that's a big If.

Elsewhere, the main non-Brexit non-Trump topic in financial markets was the summons of South African finance minister Pravin Gordhan on a charge of fraud. Though it was not wholly unexpected it was enough to knock 3% off the rand's value. The principal concern is that the move will be the final nail in the coffin of South Africa's "investment grade" credit rating.

Ecostat-free zone
Except for Swedish inflation, which slowed to 0.9% in September and sent the krona -1.5% lower, the only important data yesterday were for German and Euroland investor sentiment. There were improvements in all three measures. 

Today's list gets no more exciting than German wholesale prices, French and Portuguese inflation and euro zone industrial production. China's trade figures come out tonight.

Two non-statistical events will be of greater interest to investors. Prime minister's question time in parliament will be followed by that debate on "Parliamentary scrutiny of the UK leaving the EU" and the FOMC minutes this evening might shed more light on the likelihood of a US rate hike in December.