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Sterling jumps on Brexit transition deal

Published: Tuesday 20 March 2018

  • Higher interest rates are signalled by bond markets
  • Central banks in the driving seat this week
​​By David Johnson

Sterling surge signalling change?
Yesterday gave us an example of the underlying pent up desire to buy Sterling. An announcement that a Brexit transition arrangement had been agreed saw Sterling surge by a cent against the Euro and US Dollar before some short term profit taking took place. So I was surprised when the Institute for Fiscal Studies (IFS) declared that prices would rise after Brexit, largely due to the decline in the value of the Pound.  The IFS has been known to get it wrong in the past and I think they need to reassess their assumptions.
That was practically the only Sterling related data yesterday due to a very thin data diary.  But that lack of distraction has led to a number of interesting assessments being published overnight. Some of the indicators in the bond markets (which I cannot even begin to claim to understand) are pointing to concerns over high credit costs and that comes ahead of several central banks events this week. It will be interesting to see if the Bank of England (BoE) starts to talk about rate hikes when they meet on Thursday. Today brings UK inflation data, which shows a small drop to 2.7% for February. I suspect that is priced into the value of the Pound, so has not had a huge effect on the strength of Sterling, although it has slowed the surge we saw yesterday.
Central bank views anticipated eagerly
Before the Bank of England, we get the US Federal Reserve’s views, as well as those of the Reserve Bank of New Zealand (RBNZ) tomorrow. That ought to liven things up.
Eurozone awaits business and consumer sentiment today
From the Eurozone, we will get the German ZEW business sentiment and expectations indices, as well as a consumer confidence report. The indicators are that these ought to be lower than the previous month and that could weaken the Euro through the morning.
A sad end, but hope for a new beginning
And very sad news that Sudan, the last male Northern White Rhino on the planet has passed away at the ripe old age of 45. He was being cared for at the Ol Pejeta Conservancy in Kenya and he may yet father the regeneration of the species through IVF using females from the Southern White Rhino species. Isn’t it so very sad that these measures are needed, largely due to centuries’ old nonsensical beliefs and ignorance about the nature of their horns?!

A woman walks into a chemist and asks the pharmacist for some arsenic.

The pharmacist says, “That’s a very dangerous drug. What do you want it for?”

“To kill my husband,” says the woman.

“In that case, I definitely can’t sell it to you” says the pharmacist.

The woman reaches into her bag and brings out an envelope. From the envelope she extracts several photographs. She shuffles through until she finds the one she wants and shows it to the pharmacist.

It is an image taken with a long lens that shows the woman’s husband in a very compromising position with a naked woman.

The pharmacist looks at the picture and says, “Is that my wife?”

The woman nods.

“Well, why didn’t you tell me you had a prescription?”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
All Day Two G20 Meetings    
GBP 09:30 UK: Consumer Price Index 3.0% 2.8%
GBP 09:30 UK: Core Consumer Price Index 2.7% 2.5%
GBP 09:30 UK: Producer Price Index Input 0.7% -0.9%
EUR 10:00 EU: German ZEW Economic Sentiment 17.8 13.1

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