We’re coming towards the end of summer, the leaves are turning brown and that evening barbeque is looking a little brave. So let’s reflect. The summer equinox was on 21 June, days before the vote, and this is what everything looked like:
|21 June||Now||% change|
The cataclysm has not quite happened. In fact, I hear the UK is a superpower again – well, at least on the track, the pool, piste, pitch, mat. The Olympics have been a triumph. It seems that we can wallow in that reflective glory. But where will we be in four years’ time? Will Brexit have happened, will Brexit have meant Brexit? Will we still have a conservative government, will we have a functioning labour party, will monetary policy continue to prop up the real economy?
The amazing thing is that no one knows the answer. The pound was expected to get hammered over the summer, but has managed to stay above $1.30 and actually had its best weekly gain in more than a month. Part of this is because we all expected economic factors to prove dismal, but higher-than-anticipated retail sales and the influx of tourism have held up, the jobless count has remained stable and wage growth has proved resilient.
So how long can sterling hold on?
Industrial and manufacturing PMI data from Tuesday plus Friday’s GDP data could be portents of bad weather. Then there’s the small matter of when the UK decides to start negotiations on actually leaving the EU. We also have the excitement of the autumn statement.
Much uncertainty will either be reinforced or alleviated with the upcoming UK GDP numbers this Friday (9:30am to be on point), no doubt there will be an unfair amount of scrutiny on private consumption and import/export data – forecasts of an increase in the former and marginal decrease in the later. We also have Yellen speaking at the Jackson Hole Policy Symposium on Friday afternoon – hold on to your horses, she’s expected to signal a September rate hike.
Is this the calm before the storm? Has the warm weather and general ‘feel-good’ factor kept consumers spending? Will inflation finally bite towards the end of the year? Will monetary policy finally fail to make a difference?
Well, there’s just the one way to find out.