Sterling's big break

Mystery move

At lunchtime on Monday sterling jumped nearly a cent higher in a single bound. Whilst the move was nowhere near as dramatic as the pound's 6% plunge in early October it was equally inexplicable. Investors apparently concurred with the move: they made no effort to correct it.

Subsequent to sterling's leap commentators put forward various suggestions as to its cause. One blames a big sterling/yen order for the move. Another has it that the prime minister's speech to the CBI, in which she hinted at a softening of the Brexit negotiation stance, made the difference (though the time lag between the two makes that look a bit of a stretch). Whatever the case, the pound had a good day, strengthening by an average of 0.7% against the other dozen most actively-traded currencies. It gained one and a half US and Swiss cents and added more than one euro cent.

Having spent four months working on the assumption that sterling was doomed, investors are coming to the conclusion that they might have overcooked it. Yes, Brexit might well be harmful to the UK economy but there is a limit to how far the pound can sensibly be marked down when the event is still years away and the Article 50 trigger has not even been pulled yet. This is not to suggest that sterling is on the brink of a major recovery but the bears certainly seem to be heading into hibernation.

Words not deeds

Economic data were few and far between; big-league orators slightly less so. As well as Britain's prime minister the European Central Bank president took to the podium.

Mario Draghi told the European parliament that although the ECB is committed to providing a helpful monetary environment it cannot alone fix the euro zone's economic woes. Politicians must deliver the necessary structural reforms. Although he has been banging this drum for years, it seems that governments are not listening.

Theresa May gave little away in her address to the CBI. To quote the BBC verbatim: "The CBI, a lobby as powerful as they get, basically said 'please, please, tell us what is going on'. Theresa May in response minutes later essentially said 'not a chance'."

A dull day in prospect

Today has all the makings of a rerun of Monday, minus the excitement of sterling's unexpected surge. The only statistic of any importance is the figure for Britain's public sector net borrowing in October.

The other UK ecostat is the CBI's Industrial Trends Survey, which tots up manufacturing orders. Both will be overshadowed by the impending autumn statement from chancellor Philip Hammond. 

North American statisticians will be scarcely more forthcoming. Canadian retail sales are expected to have increased by 0.6% in September and US existing home sales may have slowed in October. The Conference Board's provisional index of consumer confidence is pencilled in at -7.8, a slight improvement, and the Richmond Fed will reveal its latest manufacturing index.