- Sterling bounces on certainty of a new PM
- Aussie business confidence up
- BOE takes centre stage
With the departure of Andrea Leadsom from the Tory leadership race, we now know Britain will have its 2nd
female Prime Minister as from Wednesday. Sterling strengthened a little on the announcement; that mote of uncertainty having been removed from the equation. Theresa May might just rue the day she put her name forward when you consider the task at hand; not least the fact that, as an MP who voted to remain in the EU, she now has the complex task of negotiating Britain's exit with as many positive outcomes as possible.
Nonetheless, the Pound has retained its gains and pushed a little higher overnight. This isn't perhaps a sea-change but it may be a more stable base from which Sterling can mount a come-back. It all depends on when Article 50 is invoked and how those negotiations progress. None of the exit transition is going to be fast, so rest assured we are in for an extended period of uncertainty and therefore volatility. As at this morning, the Pound is back up to $1.31 and €1.18 and has pushed up against most other currencies, in spite of poor retail sales (bad weather is blamed) and in spite of the British Chambers of Commerce telling us the UK economy was starting to struggle even before the Brexit vote.
Away from the UK, the EU has a lot of problems still. Italian banks are in sharp focus, with the International Monetary Fund warning of huge numbers of non-performing loans (NPL) in Italy and the talks to try to get EU funds to bail out Banca Monte dei Paschi are at a tense stage. Failure of the bank is probably going to be avoided because it would be a dreadful turn of events at such a tense time for the EU. Nonetheless, I personally think the Euro is likely to weaken as further bank problems are exposed. Italy is the Eurozone's Third largest economy and is in a lot of financial difficult, as is the 2nd
largest Eurozone economy, France.
Overnight we hear that the Australian NAB business sentiment improved in June to +6 from +3 the previous month. That's in spite of the Yuan being weakened by the Chinese central bank and in spite of the global nervousness caused by the US's delayed interest rate hikes and the UK's exit from the EU. The Aussie Dollar, although a tad weaker against the Pound, has improved on other exchange rates.
Today's data diary is dominated by the Bank of England. Governor Carney will deliver the bank's Quarterly bulletin and speak with the Treasury Select Committee wherein I suspect there will be a lot of talk about provision for the fallout from Brexit. For once, that testimony will be riveting. Other than these things, it will be a quiet day for the data diarists.
Mind you, we are being watched from outer space – apparently. President of the EU commission Jean Claude Juncker made a slip when speaking at a commission meeting. He said "I have seen, listened and heard many leaders of other planets and they are very worried because they wonder about the course the EU will follow". As you might imagine, the fact the Jean Claude can converse with alien life forms has been seen as a bit of a boon to the Planter Earth and conspiracy theorists are now convinced the Illuminati are working with aliens. Wowee! All that for the sake of a slip of the tongue.
A woman called the airline customer-service desk asking if she could take her dog on board.
“Sure,” said the airline bloke, “as long as you provide your own carrier. Please be aware though," he continued, "it needs to be large enough for the dog to stand up, sit down, turn around, and roll over".
The woman said, "Ahh forget it, I’ll put him in kennels. I'd never be able to teach him all of that by tomorrow!”
Today's Major Economic Releases
||BoE Gov Carney speaks
||NFIB small business index
||US: Wholesales inventories m/m
||New Zealand: FPI m/m
FX Research by David Johnson
Daily Currency Analysis with Joe De Berniere
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