Tat ta-ta-taa!

The oracle speaks

Six months on from her enigmatic observation that "Brexit means Brexit" Theresa May will this morning cast a little more light on its practicalities. Her speech is scheduled for 1145h and investors are waiting with bated breath, even though its main points have already been leaked.

The prime minister has "12 objectives that amount to one big goal" including "a new and equal partnership" with the EU in "the right deal for Britain". She wants to "make Britain fairer and to build a more global Britain too". The government's plan does "not seek to adopt a model already enjoyed by other countries" because "the United Kingdom is leaving the European Union". It will be a "clean break", known in the trade as a hard Brexit.

There is no sign that investors are dismayed by the prime minister's stance. It is pretty much what they had steeled themselves to expect: Britain's economic relationship with the EU will take second place to immigration controls. Consequently Sterling drifted higher overnight, recouping around a third of its earlier losses in the Far East. On the day it is up by an average of 0.4% with gains of three quarters of a US cent and just under half a Euro cent.

Speaking in tongues

Bank of England governor Mark Carney spoke yesterday at the London School of Economics. His highly technical speech, entitled "Lambda", contained more than a few mathematical equations. The layman's punch line, however, was "there are limits to the extent to which above-target inflation can be tolerated".

Dr Carney went on to say that "monetary policy can respond, in either direction, to changes to the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target". Given the increasing upward pressure of a weak Pound on consumer prices, the inference must be that the next move for interest rates, whenever it comes, is likely to be upwards.

The governor's speech was not overtly positive for Sterling, if only because the bulk of it was incomprehensible to most investors. Even so, it did suggest that he is not champing at the bit to relax monetary policy any further.


Hard on the heels of the governor's speech a dozen figures this morning will reveal where UK retail, consumer and producer prices were going last month. The headline CPI inflation measure is forecast to come in at 1.4%.

At anything like that level inflation would be unlikely to have any more than a fleeting impact on Sterling. Nor are there any other economic statistics on today's list with any real prospect of influencing exchange rates. ZEW's survey's of investor confidence in Germany and Euroland will be of passing interest. 

For Sterling it all comes down to Ms May's speech. In theory, Downing Street's leakage of its main points should mean it has already been discounted. But this is Sterling we are talking about: nothing is ever that simple for the Pound.