Some you win

Dangerous game

With golf now uncomfortably established as an Olympic sport the organisers are casting about for the next Big Thing. Darts and snooker are apparently not athletic enough but horse-riding is, so the suggestion is to bring in that old classic; jousting. Well at least it's safer than trading the pound.

After losing comprehensively on Tuesday sterling led the major currency field by a mile yesterday, strengthening by an average of 1.1%. It was up by 2% against the Japanese yen. On two of the last six working days the pound has come out on top and on three it has been at the bottom of the pile. Over that period its net gain averages 0.3%; a third of a euro cent, i.e. not much.

The pound got two legs up on Wednesday The first was a surprisingly good set of employment data which showed unemployment falling to 4.9%, an 11-year low, and gross earnings rising by an annual 2.3%. The second was the Bank of England's quarterly Agents' Summary of Business Conditions, which discovered "no clear evidence of a sharp general slowing in activity" following the Brexit vote. Investors seemed to like the combination.

European Central Bank

The Governing Council of the ECB meets today to discuss policy for the first time since the UK referendum. Like the rest of the world the council has nothing, Brexitwise, upon which to base any decision.

What it does have, however, is a problem with its existing policy. The ECB's asset purchase programme, in which it buys €Z government and top-quality corporate bonds, is running out of fodder. The bank cannot buy securities yielding less than its deposit rate, currently -0.4%. That rules out nearly two thirds of German bonds. Analysts reckon that means the ECB will run out of potential German targets within months, possibly even by the end of next month.

Investors will therefore be keen to hear what changes, if any, the ECB makes to its quantitative easing criteria today. A relaxation of the rules would make more bonds eligible for purchase and, as a result, their prices would rise and yields fall. In effect, the ECB is gradually pricing itself out of the market but at least it is driving down borrowing costs for the highest-quality borrowers.

Retail sales

After Wednesday's triumph the supporters of sterling will be hoping for a decent set of UK retail sales data today. Analysts think they will be disappointed. Sterling's performance will depend on the scale of that disappointment.

The consensus forecast is that sales will have fallen by -0.6% in June, dragging down the annual pace of growth from 6% to 5%. To compound the felony, public sector net borrowing is expected to be higher for the month.

There are no Euroland ecostats on the agenda. The United States reports on weekly jobless claims, manufacturing in the Philadelphia Fed region and existing home sales. The only Canadian figure is for wholesale sales in May.