One pace back

What happened there then?

At half past nine yesterday sterling dropped half a US cent in next to no time. There were no data to precipitate the move and no startling economic news or events. Well then, it's obvious isn't it? Brexit. Everything can be blamed on Brexit nowadays. Anyway, there was a story about a new legal challenge that seeks to separate Britain's membership of the EU from its participation in the European Economic Area. So that must be it.

In reality, the pound's fall owed more to profit-taking than to Brexit or any other fundamental economic factor. Sterling has been - and remains - the top performer over the last month, strengthening by an average of 3.8%. With gains of that scale in hand, a decent-sized order to sell sterling - or even the rumour of one - would have been enough to encourage investors to take some profit or at least to pull back their bids. The net result was an average daily loss of -0.8% for the pound. It dropped a third of a euro cent, half a Swiss cent and one US cent. 

Draghi doesn't know

More in hope than in expectation, MEPs asked the European Central Bank president what would be the consequences of Britain leaving the EU. Mario Draghi offered the only possible answer: "We don't know." He did, however, allow that "right now the greatest risk comes from impaired growth".

The ECB Governing Council meets next Thursday to decide what next to do with monetary policy. Sig. Draghi's comments to the European parliament all pointed to a continuation of the ECB's current strategy of asset purchases and ultra-low interest rates. The only question is whether or not the council will decide to extend the programme beyond its theoretical end-date next March.

Two ballots on Sunday could influence that decision. Prime minister Matteo Renzi could resign if, as looks likely, a referendum in Italy rejects his reform plans. Such a result would also make life even more difficult for Italian banks. In Austria electors will have to choose between two presidential candidates; one green, the other a Trumpesque right-winger who has toyed with the idea of taking the country out of the EU.


The hero of today's agenda is the revised figure for US economic growth in the third quarter. A tiny upward revision is possible.

The first estimate a month ago suggested that US gross domestic product expanded by an annualised 2.9% in Q3, which equates to a quarterly 0.7%. Analysts think that could be revised to 3.0%, which would just be enough to lift quarterly growth to 0.8%. Sweden also reports on GDP this morning; growth there is pencilled in at a rather more modest 0.3%.

Britain's ecostats all relate to money supply. Of most interest to investors is the figure for mortgage approvals, though the interest will be purely theoretical: the chance of it having any effect on monetary policy is vanishingly small.