With no meaningful data from either side of the Channel, yesterday the markets focused on the likelihood of an attempt to replace the prime minister. Along with the cost of borrowing, measured by bond yields, the pound-euro rate ebbed and flowed through the day as the prime minister faced calls for his resignation from the leader of the Labour Party in Scotland. The word is that the Scottish leader expected other important party figures to follow.
When they didn’t, and indeed volubly supported Starmer, the pound recovered. No-one knows what the next move in this slow-moving political car crash will be, but bond yields and the pound seem likely to follow it. Markets don’t “price” personalities, but they do price down instability.
You can see the effect of politics on a currency in Japan, where the election of Sanae Takaichi as prime minister, armed with a fiscal stimulus plan, boosted Japanese stock markets to record highs. The yen followed.
Overnight we have had some data at last. The British Retail Consortium showed a 2.3% like-for-like growth in sales in January, as shoppers returned to shopping in force. This was far ahead of expectations.
Still to come this week, Non-Farm Payrolls (NFP) in the USA and Gross Domestic Product (GDP) in the UK on Thursday. Plus, politics…
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