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June 2016

Sterling stabilises

Published: Wednesday 29 June 2016

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  • Sterling stabilises
  • US Fed gets housing and spending data to mull

Could the MPs all just shut up now! The next time I hear an ill-informed MP tell me the economy is melt-down, I will personally go round and take them by the.........grrrr......deep breath. The economy has shown no signs of being in melt-down, the markets dived as markets do when confronted by uncertainty but they have rebalanced now that it is clear that, as of this minute, not much has changed. I can reliably report that, every day since the referendum result was announced, the sun has risen and fallen, the birds have sung and people have gone about their business awaiting the time when headless-chicken political organisations get their acts together and start planning for the future.
 
UK house prices rose 5.1% in the year to June, Dixons saw a rise in profits of 17% last year, L&G has reported that its balance sheets are robust in the wake of the referendum and it goes on. Could the political classes stop whingeing about not getting their own way and start talking up the future of the UK economy right this minute please? How else are we going to do well in the upcoming negotiations with the EU and the rest of the world? Doom and gloom just ain't helping guys.
 
Sterling is one of those things that fell quickly but has now found its feet. Those feet, as with all upright people, were well below the highs we saw a month back but the Pound had been pushed up to those levels by investors who had counted a lot of chickens before the referendum hatched another plan. So Sterling is at lower levels than before but that is great for exporters who will look more attractive to overseas buyers and it is great for the UK tourist industry which may well get an influx of visitors fearful of the visa implications of a Brexit and trying to see Anne Hathaway's cottage before it gets harder to do. 
 
This morning brings the Eurozone business and consumer confidence indicators. I suspect they will have taken a bit of a knock in the wake of the UK vote but the EU made it clear yesterday that, having got the trouble-making Brits out of the way, they can plough on with ever closer integration. Whether further referenda will hamper that plan is a moot point at this stage.  We will also get EU inflation data but there really isn't any inflation to speak of anywhere at the moment, so that is unlikely to obscure the Brexit repercussions.
 
There is a barrage of housing and personal income & expenditure data from the US later. The Federal Reserve will watch all of that with a keen eye because they are in a quandary over whether they have scope for interest rate hikes or whether they need to sit on their hands for the rest of the year. The US Dollar is remarkably strong; benefitting from its safe haven status, but it is rather overbought at these levels and could cede some of that strength if this data is poor.
 
What was interesting yesterday was a report that sun spots have all but stopped for now and that may herald a new ice age. So we go from predictions of global warming to global freezing in one swift movement but how are they going to tax us on that?
 

 Short jokes

 
Q             Why is moon rock harder to digest than Earth rock?
A             It’s a little meteor.
 
Q             How does a deep space astronaut cut his hair?
A             Eclipse it.
 
Q             What was the weather like at the end of the ice age?
A             Moraine.
 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
EUR Day 2 EU Economic summit    
GBP 09:30 UK: Net lending to individuals m/m 1.6B 4.3B
USD 13:30 US: Core PCE price index m/m 0.2% 0.2%
USD 13:30 US: Personal spending m/m 1.0% 0.4%
USD 15:00 US: Pending home sales m/m 5.1% -0.9%
NZD 23:45 New Zealand: Building consents m/m 6.6% 6.6%

FX Research by David Johnson

Daily Currency Analysis with Michael Hart

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