Pound Strong Ahead of Repeal Bill Vote
Today, the Pound strengthened against the Euro and continues to be close to a six-week high against the US Dollar, just before ministers cast their vote on the Great Repeal Bill at midnight, tonight. David Davis, the Brexit Secretary, warned that voting against the Repeal Bill is equal to backing a chaotic exit from the European Union. Davis said that British citizens didn’t vote for confusion in last summer’s referendum. Caroline Flint, a Labour MP and former Europe minister, announced that she will not side with Labour in this case because she believes “it’s Labour’s job to improve this bill, not kill it as it begins its passage through Parliament.”
Stock markets across the globe received a welcome boost today, as North Korea didn’t proceed in testing a new missile during the weekend. Hurricane Irma devastated a large part of Florida, but it has now been downgraded to a category 2 storm. Millions of homes and businesses lost electric power. However, insurance companies’ shares jumped as the consequences of the storm were less severe than expected.
Pound Sterling – UK Markets
Today, the Pound dipped against the US Dollar, with the exchange rate set just below the $1.32 mark. Sterling edged up against the Euro, with the exchange rate set at €1.09. FTSE100 Index rebounded into positive territory, following the example of Asian, and the rest of the European, stock markets which moved higher thanks to a boost from investors’ risk-on appetite.
Offshore wind farms are officially the cheapest way to cover the UK’s energy needs, based on the results of an energy subsidy auction held by the government. The auction was aimed at less established technologies such as offshore wind energy tech and energy deriving from tidal currencies. The result of the auction showed that two offshore windfarms will be built for £57.50 per MWh, a cost much lower than the £70-90 that was anticipated. The energy cost per MWh is significantly lower than the £92.50 per MWh for the new nuclear reactor being built at Hinkley Point.
A poll by the Institute for Policy Research at the University of Bath found that almost half of British citizens support the introduction of a Universal Basic Income (UBI). This would mean that UK citizens would receive a sum of money, which would be enough to cover basic needs, such as clothes and food, but not housing costs. However, the share of people who want the UBI to be introduced, drops significantly if it is to be funded through increased taxation. The survey showed that one out of two Conservative-leaning voters would be in favour of the UBI, if its introduction would be accompanied by cutting existing benefits.
US Dollar – US Markets
The US Dollar edged up against the Euro, with the exchange rate set at €0.83. The US Dollar Index (DXY), which measures the value of the US currency against six major currencies, also moved higher at 91.61. The Dollar benefitted from the quiet weekend in the Korean peninsula.
Kim Jong Un preferred to celebrate the 69th anniversary of North Korea’s foundation, instead of testing a new Intercontinental Ballistic Missile (ICBM) as some defence analysts were afraid that he would do. The absence of a new missile test triggered a risk-on approach from traders, who tried to capitalise on the fact that the situation didn’t get worse. However, North Korean officials warned that if the US “did rig up the illegal and unlawful UN resolution on harsher sanctions, the DPRK shall make absolutely sure that the US pays a due price.”
Hurricane Irma is moving north-west towards Tampa Bay, leaving 4 million Florida houses without electricity and having caused severe damages to infrastructure. Debbie Wasserman-Schulz, a member of Congress, said that Florida will require the most expensive programme in US history in order to recover from the hurricane’s pass. Willian Dudley, the New York’s Fed President said on Friday that the transitory negative effects from the hurricane phenomena will be over by the end of the year and rebuilding efforts will boost the US economy in the beginning of 2018.
Euro – European Markets
The Euro slumped against the US Dollar, with the exchange rate set at $1.20. The single market currency fell because traders returned to buying US Dollars after a quiet weekend in Korea and comments made by a senior ECB board member regarding the central bank’s monetary policy.
Benoit Coeure, a French economist and an ECB board member, said, during a speech in Frankfurt, that monetary policy will remain more accommodative for longer. Right after his comments, the Euro fell briefly under the $1.20 mark. Coeure noted that the policy-relevant horizon is likely to be longer given the persistence of subdued inflationary pressures. Coeure added that “there is compelling international evidence that non-standard monetary policy measures have been successful.”
Analysts at Bank of America Merrill Lynch (BAML) expect that the ECB will stretch its quantitative easing (QE) programme by the end of 2018. According to their report, the reason for this is the strength of the Euro, which will force the ECB to revise down its inflation projection downwards, once more, in September. They also expect that the Eurozone’s central bank will discuss rate hikes only when inflation will be close to its set target.
Other Currencies – Highlights
Sterling strengthened against the Australian Dollar, trading at 1.64 AUD. Harry Triguboff told the Australian Business Review that the fall in new apartment prices will have a big impact on the economy, unless the government tackles the problem. Triguboff, who is the biggest apartment builder in Australia and a billionaire, urged the federal and the local governments to review their policies on taxing foreign investors and added that the increase in number of first-home buyers is not enough to replace offshore and local investors.
The Pound edged lower against the New Zealand Dollar, trading at 1.81 NZD. According to Statistics New Zealand, electronic card retail sales in August fell by 0.2%, on a month-to-month basis. A 0.6% decline had been recorded in July. However, on a yearly basis, electronic card retail sales picked up in August by 4.4%, doubling the 2.0% July figure. Total spending, including non-retail industries, increased by 0.6% in the last month of the summer. Westpac economists suggest that “subdued growth in spending levels reflects the softness in prices, particularly for imported consumer goods.”
Sterling jumped against the Swiss Franc, trading at 1.25 CHF. The Swiss National Bank (SNB) is meeting on Thursday to decide on the issue of interest rates. Analysts predict that the SNB board will keep the central bank’s benchmark interest rate unchanged at -0.75%.