It looks like the move lower in the Pound is done for now, as for the last few days the bickering over what can and can’t be done to stop a no-deal Brexit has made little further impact on Sterling. That said, we ‘re sitting at an uncomfortably low level and there is the odd flirtation with a downward move, but even in these quiet markets there seems to be just enough appetite to keep it from falling into the abyss.
The markets are actually the least liquid they’ve been in August since 2010, according to JP Morgan. They say that across US bonds, global equities and the currency market volumes have been lower and therefore some of the moves we’ve seen have been even more erratic than they would have been in other summers.
In Brexit: the latest comes from speaker of the House John Bercow, who has said he’ll use every bone in his body to stop the PM from proroguing parliament in a bid to force through a no-deal. Philip Hammond has also been vocal, saying that the new demands that Boris has placed upon the EU are unmeetable and “the pivot from demanding changes to the backstop to demanding its total removal is a pivot from a tough negotiating stance to a wrecking one”. He also took a swipe at Dominic Cummings by saying “the unelected people who pull the strings of this government know that this is a demand the EU cannot and will not accede to”.
The government may be going down an unpopular path, but at least they’re putting plans in place should a no-deal happen. The latest is that they’re urging industry bodies to bid for “business readiness grants” by the end of next week in order to receive monies which would then be spent on telling businesses how to prepare for a no-deal Brexit. Ideas on a postcard on how to prepare please….
If Brexit feels like groundhog day, then so does the rest of the news that’s driving these markets: China are steadily weakening their currency, albeit slowly. Since it broke through the ‘7.0’ barrier versus the Dollar the Chinese have kept it there. The market had expected them to weaken it further overnight, but perhaps in a nod to Donald easing up on specific tariffs they didn’t go through with it.
Trump yesterday said for reasons of national security, heath, safety (and Black Friday availability) tariffs would be suspended on a selection of consumer goods until December 15th. The news was greeted warmly in the markets, with Wall Street up around 1.5% and other stocks directly linked to global supply and demand also faring very well – a possible sign that if we did get a more permanent improvement on the trade war, the relief rally would be significant – on the other side of that argument, it may be purely because the market is so thin that anyone hitting a buy button is shifting the dial.
China has accused the US of being involved in the Hong Kong protests, saying that comments from US lawmakers have fuelled the protest “by neglecting and distorting the truth”. The foreign ministry said yesterday “we solemnly remind you this plain truth: Hong Kong affairs are entirely China’s internal affairs, and you are neither entitled nor qualified to wantonly comment on them.” The long read comes from CNBC and is well worth it.
Some news from elsewhere: India’s rupee looks set to become Asia’s worst performing currency. The weakness in the rupee could in turn cause it to drop further as investors that put money into India for the short term don’t usually hedge their currency risk because of the cost to do so – with the move lower they may decide to exit investments early and sell the currency, which in turn weakens the rupee some more. The increased overseas appetite in India came as the government eased limits on the amounts of debt that foreigners could buy, this has caused larger trading volumes in the rupee and in turn exacerbated these risks. Bloomberg has the full story
Have a great day.