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Sterling sliding ahead of Bank of England testimony

Published: Tuesday 22 May 2018

  • Italy may have new Prime Minister
  • US Dollar still ramping away
​​By David Johnson

It looks likely that a largely unknown law professor may become Italy’s latest Prime Minister. The President still has a veto if he so chooses but Giuseppe Conte is a name we are likely to hear a lot more.
Sterling slips again

Sterling has slipped again as more Brexit discussion and speculation takes place and the day ahead brings government borrowing data as well as the governor of the Bank of England testifying to the Treasury Select Committee on the small matter of inflation. The Pound starts the day down below €1.14 again and around USD 1.3440.  The CBI industrial trends survey is expected to be rather downbeat, so further Sterling weakness is a possibility.
US Dollar remains rampant

The USD, by way of contrast, is rampant. It has gained against everything in spite of higher oil prices and a general pickup in global demand. That kind of scenario would normally tempt scaredy-cat investors out of the safety of US treasuries and into higher yielding assets elsewhere. That isn’t happening. Maybe the rise of America as an oil producer is behind it. Maybe the brazen protectionism being shown by the Trump administration is a factor. Maybe traders are assuming further monetary tightening in the days ahead from the Federal Reserve. Maybe it is a little bit of all of the above. There isn’t much US data at all today, so there is a profit taking opportunity for traders. A little USD rebound is possible.
And once in a while a Quest raises its head. That is what happened to Glaswegian, Craig Mitchell. When the Scottish assembly raised the minimum price for alcohol, Craig’s beloved Asda cider went up from £2.15 to £5.75 for a 2Lt bottle. Craig rose to the challenge and his quest took him from Glasgow to Carlisle when he purchased 100 bottles and saved himself £180 in the process. I am guessing his next quest will be to a treatment centre for liver problems but that is a quest for another day. 


A guy comes home to find his wife sprawled on the floor with a paint brush in one hand. She is melting with sweat because it is a hot day and she is wearing a puffer jacket over a rain mac. He grabs water from the fridge and revives her as he strips her down to just her T shirt and jeans. As she comes round, and swigs the water, he says, “What on earth were you doing?”
She says, “Well I wanted to surprise you.”
“Well you definitely did that but what was going on?”
“We’ve been meaning to paint the dining room for ages, and there was this paint I liked, so I bought it and thought I would paint the room to surprise you when you got home.”
“But what was with the puffer jacket and the rain mac?”
“It said on the tin, ‘for best results, put on two coats.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Public Sector Net Borrowing -0.3b 7.2b
GBP 10:00 UK: Inflation Report Hearings    
GBP 11:00 UK: Confederation of British Industry Industrial Orders Expectations  4 2
CAD 13:30 Canada: Wholesales Sales -0.8% 0.8%
USD 15:00 US: Richmond Manufacturing Index -3 9

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