Two to the rear

No help from CPI

Government ministers hurried to Downing Street yesterday, some clutching mobile phones. Although the official story is that they were attending a cabinet meeting, the rumour is that they were trying to capture Machupichu at Number 10. Sterling, meanwhile, was coming to a PokéStop.

After doing tolerably well on Monday the pound was back on the defensive and not making a very good fist of it. Sterling was the back-marker among the major currencies, falling by an average of -0.5%. On the day it is down by a third of a euro cent and one US cent. It is firmer by 1% against the Turkish lira but only because there was a general exodus from the currency as investors learned that the government purge had broadened to include teachers. 

The UK inflation data were theoretically positive for the pound. Consumer prices rose by 0.2% in June, lifting the inflation rate from 0.3% to 0.5%, and the retail price index was up from 1.4% to 1.6%. However, those numbers were nowhere near high enough to stand in the way of the Monetary Policy Committee if it wants to cut the Bank Rate next month.

IMF cautious

The International Monetary Fund published its World Economic Outlook UPDATE on Tuesday afternoon, entitled "Uncertainty in the Aftermath of the U.K. Referendum". As a result of the vote "the global outlook for 2016-17 has worsened". 

The update notes that "Among advanced economies, the United Kingdom experienced the largest downward revision in forecasted growth", which is now estimated at 1.7% for the currency year and 1.3% in 2017. The equivalent numbers for Euroland are 1.6% and 1.4% while for the United States they are 1.8% and 1.8%. 

Those numbers suggest cumulative growth over the two years will be identical (3.02%) in the UK and the €Z. Investors recognised this in their treatment of the euro and the pound, selling both against the dollar with only a third of a cent to separate them. The case against starling might have been more compelling because of the greater uncertainty but the euro was also hurt by sharp falls for investor sentiment in Germany and Euroland.

Will jobs matter?

The most important ecostats on today's list are for UK employment. The pound could also be sensitive to Theresa May's performance as she answers Prime Minister's Questions for the first time and investors will certainly be keen to hear what comes of her meeting with Chancellor Merkel in Berlin.

Like yesterday's inflation data, today's job numbers relate to a time prior to the Brexit vote. Also in common with the CPI figures, they will have little bearing on next month's Monetary policy decision. That being the case, they ought not to have much effect on the value of sterling. However, it is easier to see disappointing numbers sending the pound lower than strong ones helping it higher.

There is little else on the agenda. Australian business confidence comes out tonight.