Careless talk costs pounds

Costly speech

Two speakers put the boot into sterling on Tuesday. It is unlikely that either of them set out to hurt the pound but that was the result. Except for the South African rand, which suffered alongside other emerging market currencies, sterling was the day's biggest loser.

In the relaunch of her premiership Theresa May offered no concession to those who believe a "hard Brexit" would hurt the UK economy. She said "I am convinced that the path that I set out in that first speech outside Number 10… remains the right one". Her metaphoric reiteration of Brexit-means-Brexit did not go down well with investors.

The words of Ben Broadbent, a deputy governor of the Bank of England, went down very much more badly. His speech, entitled "Winners from globalisation", left investors in no doubt that he thought Brexit Britain would not be one of them. Moreover, he did not touch at all upon monetary policy, allowing the market to assume he would continue to vote for no change to interest rates. Sterling lost an average of -0.5% on the day, which included one and a quarter euro cents and one and a half yen.

Nothing to see

The latest word from 1600 Pennsylvania Avenue is that Donald Trump II did indeed seek help from Russia during the election but the information was of no use and he didn't tell his dad. So no wrong was done. Investors were not totally convinced and the US dollar was Tuesday's third-worst performer.

It is not the allegations of impropriety themselves that concern investors, it is the distraction they pose to Donald Trump's administration. The president has so far failed to press ahead with the tax cuts and infrastructure, upon which investors had pinned their hopes, because he has too many smaller fish to fry.

This latest Russian development does not improve that perception of presidential impotence but it can hardly change it for the worse, hence the dollar's quarter-cent gain over sterling.

Janet, Stephen and wages

Today's ecostat agenda is not huge but it will be beefed up by two central bankers; the Federal Reserve's Janet Yellen and the Bank of Canada's Stephen Poloz. One will be talking to the House of Representatives, the other may or may not announce a increase to the bank's benchmark interest rate.

The market's readiness to lay into sterling yesterday does not bode well for the pound when the employment and wages data come out at half past nine. The rate of unemployment and the change in jobseeker numbers sort of matter but the real risk lies in the growth of average earnings. Analysts expect pay growth to have slowed from 2.1% to 1.9%, eating further into real after-inflation earnings.

Following governor Stephen Poloz's comment a fortnight ago that "low interest rates have done their job" it is likely that the BoC will lift its benchmark from 0.5% to 0.75%. If it doesn't, watch out for the Loonie.