The more defeats the government suffers, the higher the pound seems to rally. We saw a big rise in sterling vs the USD yesterday to above the 1.2340 level, which it has managed to maintain since. There has been further buying in sterling as European markets opened. Sterling is now the best performing G10 currency over the last 30 days, with most of that upside coming since Boris Johnson lost control of Parliament.
The prime minister has now prorogued Parliament, effectively shutting down further debate until the middle of October. Johnson was again refused the prospect of an election in yet another defeat for the government in the Commons last night.
Traders will be watching what the government does very closely. Sterling was also boosted by positive economic data which saw the UK economy grow by 0.3% in July.
Banks up despite ongoing PPI impact fears
The FTSE opened down marginally this morning. Lloyds Bank, Barclays and HSBC were all in the green as they bounced back from news of a last minute rush of PPI claims in August. Banks like Lloyds and Co-op have already said they expect last minute requests to hit financial performance in Q2-3. Lloyds is still well down on its July levels following heavy selling in August.
China data pushes Asian and European markets down
China’s blue chip share index, the CSI300, was down 0.41% overnight as more negative economic data emerged. This also pulled down most Asian exchanges, although the Nikkei still managed to finish in positive territory.
We are seeing more focus on the response of central banks to the slowdown however, with all eyes on the ECB on Thursday, where there is the expectation that some form of stimulus package will be announced. Also on the radar is the Fed meeting next week when the US central bank is expected to cut rates.
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