Sterling Facing Critical Week

Sterling Facing Critical Week

There's a perfect storm approaching the pound this week with critical factors affecting Sterling on a collision course. Analysts cite political uncertainty, macroeconomic data and monetary policy as the three main drivers of economy and therefore currency. There isn’t one which is more important than the other and they are all interwoven each influencing the other two to a varying degree dependent upon the level of each or in the case of data, the degree of variation from expectation. This week the U.K. faces the influence of all three drivers. Parliament will vote on the first Bill put before it that provides an opportunity to appraise the Government's performance. Despite the almost universal disapproval of how Brexit is being handled, their vote to pass legislation that repeals the original decision to join the then Common Market, should pass within the slimmest of majorities. Next comes macroeconomic data. First is inflation which will be released tomorrow. The headline is likely to have reached 2.8%...
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Hard Brexit? Sell Sterling!

Hard Brexit? Sell Sterling!

Davis and Fox; Brexit Hawks If anyone in the U.K. didn’t believe that Brexit was going to happen, they should have had their eyes very firmly opened on 20th July. The first joint Press Conference given by the major Protagonists, Michel Barnier and David Davis since negotiations began in earnest brought clarity to the task that lies ahead. Barnier finds it very difficult to hide his frustration at what he sees as the intransigence of the U.K.’s bargaining position. In a very European/EU/Brussels way, he clearly feels that the U.K. is arguing over points of law such as who protects the rights of the EU citizens remaining in the U.K. post-Brexit. Davis, on the other hand is displaying a very 21st century British approach like a Blair/Farage caricature. He seems to either not be listening when Barnier speaks or not taking the whole thing particularly seriously. It has now been revealed that such meetings will take place for four days a month. That leaves...
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Central Banks and Inflation; A difficult relationship

Central Banks and Inflation; A difficult relationship

What else matters? Inflation, if you want to know how serious it is; ask a Zimbabwean! The U.S. released inflation data for June on Friday and whether it is the brilliant job being done by the FOMC in raising interest rates, “global factors” a weak housing market or some other reason, there is no question that inflation is barely a factor in the U.S. economy. Consumer prices rose by 1.6% in June falling from 1.9% in May. The average of the data over the past year is 1.88%. It is true that around the turn of the year, inflation was consistently above the 2% target set by the Administration. The average for 2017 has been 2.21% so purely on that measure a proactive Fed has acted wisely. The rest of the G7 Central Banks have their own inflation concerns but they vary wildly. In Japan, on the one hand, inflation has averaged 0.34% so far in 2017. Lack of inflation has been the...
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