Brief relief

What goes around…

Sterling traded at €1.17 on 15 June 2009, it was there again this morning, having for a second time in two days rebounded from just above €1.16 overnight.

As coincidence would have it, sterling traded at €1.17 on 15 June 2009, the day Gordon Brown called upon Sir John Chilcot for his help. It was there again this morning, having for a second time in two days rebounded from just above €1.16 overnight. If the pound was not looking more relaxed over the last 24 hours at least it was looking less stressed: sterling was on average 0.2% higher on the day. It strengthened by exactly that much against the euro, the Canadian dollar and the Swiss franc, in each case worth around a quarter of a cent. The pound's only losses were to the Australian and NZ dollars.

The day's surprise winner was the Aussie, which is up by more than a cent. It would have been fair to expect it to move lower because of the inconclusive general election that has persuaded Standard and Poor's to put the country on negative watch. The Kiwi was in second place, helped by the Reserve Bank of New Zealand's threat to introduce measures by the end of the year to rein in an overheated housing market. Investors had expected them to be brought in earlier than that.

…doesn't necessarily come around

The only hope of salvation for sterling is that everyone is talking it down. Forecasts for Cable range between $1.20 and $1 and nobody is calling it higher. The predictions are based at least partly on the idea that UK rates will go down as US rates rise.

That is not to say investors are holding their breath in anticipation of a rate hike by the Fed. The minutes of the June Federal Open Market Committee meeting, published last night, showed that the committee was already neutral about monetary policy before the Britain's EU referendum. It will undoubtedly have become more cautious since then.

At the same time they are very much holding their breath for a rate cut by the Bank of England. It might not come when the MPC meets next Thursday but the governor has made it abundantly clear that one is on the cards.

Pre-referendum UK output

The headline figures for sterling today are the industrial and manufacturing output data for May and the NIESR estimate of second quarter growth. Although both are historic, weak numbers could further poison the mood.

It sort of doesn't matter what was going on in May and Q2: the Brexit decision means that things are likely to be very different in July and Q3. That is not to say the numbers will be ignored as irrelevant.

This afternoon's US jobs numbers will be seen as a pointer to tomorrow's important employment report.