Another day at the back of the pack

No break for sterling

Depending on one's viewpoint Brexit is either six months in the past or two years in the future. Either way, it continues to affect sterling's present with every twist in the government's commentary. On Tuesday the prime minister was talking to parliament's Liaison Committee and sterling was moving lower.

The Liaison Committee is a sort of committee of committees, populated by the chairmen of nearly three dozen House of Commons select committees. Its members were keen to know what was going on with the Brexit process and Theresa May was equally keen to avoid telling them. Ms May did confirm that transitional arrangements are a possibility and she promised to make a speech in the new year but she refused to confirm that parliament will get a vote on the final deal.

To investors her tone smacked of "hard" Brexit and that perception weighed on the pound. It remained at the back of the field for a second day. As on Monday, sterling's defeat was far from a drubbing. It lagged the Swiss franc by less than 20 ticks and its losses to the euro, the yen and the Australian and Canadian dollars were hardly any bigger. Yet the pound's two days at the back of the field are a reminder of its sensitivity to Brexit talk.

No worries

It was striking how easily investors looked past the politically-motivated murders in Berlin and Ankara. Stock markets around the world moved higher and the South African rand was the top-performing currency, rebounding by more than 1%. Even the Turkish lira gained some ground against sterling.

With the possible exception of Brexit, investors seem remarkably sanguine about the risks facing financial markets. Chicago's "VIX" index of volatility, often referred to by the media as the "fear index", is close to the bottom of its five-year range, America's Dow Jones 30 stock index is knocking at the door of 20,000 and the safe-haven yen is close to an 11-month low against the US dollar. 

Investors are betting that nothing will go wrong. Their Panglossian lack of concern is troubling.

Another data-lite day

Tuesday's economic data came and went without making any noticeable waves and the same is likely to be true of today's. Sweden's Riksbank will make a policy announcement this morning.

The guess is that Sweden's central bank will keep its benchmark interest rate unchanged at -0.5% and extend its asset purchase strategy for another six months. Should there be no extension to the quantitative easing programme the krona could be expected to rise.

Today's London session is bracketed by two sets of New Zealand data: Already out, the balance of trade figures indicated a slight narrowing of the deficit as exports and imports both declined. Tonight's gross domestic product numbers are forecast to show the economy expanding by 0.9% in the third quarter. Britain reports on public sector net borrowing this morning and consumer confidence tonight.