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Storm in a British teacup (Part II)

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The resignation of UK Foreign Secretary Johnson led to a small market reaction – unlike some other former UK ministers, international investors have heard of Johnson. The former foreign secretary's notoriety owed perhaps more to a slapstick comedy style than to diplomatic skill. Sterling weakened a little, then firmed.
  • Investors are unlikely to be concerned about the quality of the UK government changing after the loss of Davis and Johnson. The focus is the implications for the interminably tedious EU exit process. Prime Minister May seems relatively secure for now. If the EU were to demand major concessions over the exit, that may undermine May and the government.
  • The data calendar is mainly production data from Europe and the UK. French production figures will be hit by strike action. Otherwise, data should show economies broadly performing around trend growth. The UK unveils its new monthly GDP data, which is very exciting.
  • Chinese price data showed a stable rate of consumer price inflation, of interest only in China (taxes on US imports have not yet shown up). Producer price inflation did pick up. This does not really translate into international inflation, but domestic pricing power may show some confidence in the Chinese economy.