- Sterling holds on to strength
- EU starting to acknowledge Brexit deal is important
- 60% interest rates in Argentina
By David Johnson
Things are a lot more animated now that the Pound has recovered from a period of extended torpidity. Sterling’s bounce following the hints on Wednesday of a deal with the EU slowed and reversed a little on Thursday, when some of that rumour was questioned and when UK consumer borrowing was shown to have shrunk to the lowest level of growth since November 2015. That, coupled with a small reduction in mortgage lending, made the Pound slip a little. The lack of data today may allow a little more GBP weakness, but it all hangs on the truculence – or otherwise – of the EU Brexit negotiators… oh, and Theresa May steering clear of dance floors… oops, too late!
Deal or bust
We have heard from Gunther Oettinger, a German EU commissioner, that there is no Plan B for the EU. They have to reach a deal with the UK or the EU itself will face financial ruin. Too right, Mr Oettinger! I think Sterling would have strengthened this morning, were it not for a drop in the Nationwide House Price Index.
Canada’s economic growth was not as strong as the 3.0% forecast in Q2, but 2.9% is still very positive. Higher exports drove the growth. The Canadian Dollar is befitting from the news and also from the rumours that a North American Trade Agreement (NAFTA) linked deal between the US and Canada is nearing, after Canada appears to have made some concessions on US dairy exports.
US economics strong, despite trade arguments
US data showed Jobless Claims near the lowest ever levels and consumer spending pushing higher. The US Dollar would have strengthened more if it were not for the ongoing threat of trade argy-bargy with China et al.
And now the US president is threatening to pull out of the World Trade Organisation (WTO). That would be a big hole in the green on the WTO’s member map, but even some of the members don’t abide by the rules, so does it really matter? I am not sure.
Chinese manufacturing growth a good sign
China, which is a reluctant and rather uncooperative member of the WTO, saw its manufacturing and non-manufacturing Purchasing Manager’s Indices (PMI) rise in August, when the markets had all predicted a small fall. We had that information this morning and that bodes well for global growth; as well as having a population of 1.4 billion, China is also the manufacturer of choice for many companies in the rest of the world.
Economics and politics have the power today
Today’s data includes the Eurozone inflation figure for August, which is expected to stay at 2.1% and the afternoon brings US business and consumer sentiment indices. All could be market moving, but politics will still trump (no pun intended) data at the moment.
For those who were feeling hard-done-by when the Bank of England raised the base rate by 25 basis points to 0.75%, spare a thought for the poor people of Argentina, who have just seen their base rate rise to 60% as the central bank tries in vain to halt the slide in the Argentinean Peso. The Peso is vying with the Turkish Lira for the title of worst performing currency this year. For its part, the Turkish Lira slipped again after rumours circulated that the central bank governor was expected to resign. That was denied, but rumours tend to persist in situations like that.
Food for thought
And if all this concerns you, don’t worry, Christmas is coming. Tesco in Cambridge has already got a tree up… with lights. It was just to film an advert, apparently, but the shock and horror is all decent publicity and high street stores need as much good publicity as possible. What with Homebase facing its creditors today and other in a perilous state, perhaps if we want any kind of local shopping, we should resolve to buy local and not shop online for Christmas. What a difference that would make. Something to ponder over the weekend, perhaps.