Out of the wood?

Deus ex machina

The Daily Mail claims a programme on BBC2 this evening will reveal that merely thinking about exercise improves muscle tone. What a shame the same is not true of thinking about mowing the lawn or thinking about going to the dentist. Thinking about getting a new prime minister seems to work though.

Out of the blue one of the two remaining candidates for the position of Conservative party leader withdrew from the contest yesterday, thus anointing Theresa May for the job. Instead of the expected two months of rudderless government Mrs May will take over as prime minister tomorrow. Given investors' well-known preference for certainty over uncertainty they reacted positively to this development.

Although sterling missed out on the top slot it had its best day since Referendum Eve, strengthening by an average of 0.9%. The pound added two thirds of a euro cent, one US cent, one Swiss cent and three and a half Japanese yen. Crucially, Cable broke back above the bogey-line at US$1.30 in a way that looked almost convincing. For a second day the outliers among the major currencies were the South African rand at the top and the yen way out at the rear.

Not many numbers

As promised by Monday's agenda there was a notable shortage of tradable ecostats yesterday. Norwegian inflation accelerated from 3.4% to 3.7%, its highest level since 2008. 

The unexpectedly high rate of inflation was initially positive for the krone but it failed to hold onto its gain and within a couple of hours had fallen below the opening level. Perhaps the most heartening statistic was for Greek industrial production, which was up by 2.9% on the year. The BRC's Retail Sales Monitor, released at midnight, showed UK sales falling by -0.5% in June from the same month last year.

The Eurogroup of €Z finance ministers claimed not to have discussed the problems of Italian banks, 17% of whose loans are supposedly non-performing. But it did call for penalties on Spain and Portugal because they have not taken sufficient steps towards cutting their budget deficits.

Carney and the Spratlies

Bank of England Governor Mark Carney will attend parliament's Treasury Committee this morning to answer questions about the bank's Inflation Report. At some point the Permanent Court of Arbitration will deliver its verdict on a territorial dispute between the Philippines and China. The ecostat agenda is another thin one.

Mr Carney's first visit to Westminster since the Brexit vote could be an interesting one, especially if Mr Rees-Mogg lays into him as he did last time. Expect further confirmation that a Bank Rate cut is on the cards though not, perhaps, when it will be delivered.

The PCA decision on whether the Spratly Islands belong to the Philippines or China might also raise investors' eyebrows. China is refusing to recognise the authority of the PCA: if the verdict goes against it there could be negative implications for international relations and trade.