A technical loss

Cash-for-access possibility

Saying that the pound was Monday's weakest performer would be technically correct but disingenuous. Sterling shared last place with the South African rand and the NZ dollar and it was less than a dozen ticks behind the euro. 

The pound also lost a third of a cent to the Canadian and Australian dollars and its average loss for the day was of the same order; -0.2%. It started the day badly, hampered by reports that EC Brexit negotiators are unwilling to discuss any transitional arrangements until Britain has agreed to the terms of its departure from the EU. The pound's situation was not improved by the prospect of Scotland's first minister holding another independence referendum if her country does not get a special deal from the EU.

Against that background there was therefore a degree of relief when the prime minister refused in parliament to rule out paying money to Brussels in return for access to the single market. She did not exactly rule it in: "When we leave the EU, people want to ensure that it is the British government that decides how taxpayer money is spent". But she left the door open to a cash-for-access deal. Her comments were worth half a cent to the pound.

Bullish Yellen

Monday's leader was the US dollar. It strengthened by two thirds of a cent against the euro and by nearly a cent against sterling. The gains were the result of generally-positive economic sentiment which was reinforced by upbeat comments from the Federal Reserve chairperson.

The dollar received no particular help from the US ecostats, which were limited to a couple of provisional - and mediocre - purchasing managers' indices. However, investors are still pursuing the idea that president Trump's tax cuts and public spending will be of long-term benefit to the currency.

Janet Yellen delivered what was almost a rah-rah speech to students in Baltimore. She spoke of a labour market that is at its strongest in nearly a decade. Ms Yellen also drew attention to wage growth and low unemployment.

No change at the BoJ

This morning the Bank of Japan left monetary policy unchanged. Although at his press conference governor Kuroda delivered a positive view of the economy his words did nothing for the yen, which put in only an average performance.

Governor Kuroda implied that yen weakness and the consequent inflationary pressure will mean the next move for Japanese interest rates will be upwards. However, the BoJ will for the moment continue its quantitative easing and, with that in mind, investors saw no reason to buy the yen. 

There are a dozen or so items on today's ecostat agenda, none of them of great importance at a global level. Switzerland's balance of trade figures, which came out ahead of London's opening, proved once again that a strong currency does not preclude a trade surplus. The sole UK figure is the CBI's Distributive Trades Survey - a retail sales barometer.