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By Howard Jones on 29/09/19 | Currencies



So far we have kept our heads down on Brexit as much as possible; in commerce commentary can be confused with taking sides, and the issue is so polarised that it now descends, far too often, into a slanging match.
 
It is the nature of investing, that red mist seldom makes for good long term answers. While as the stability in the main FTSE share index shows, the current tantrums have, as yet, not percolated too deeply into long term saving plans.

But our foreign exchange colleagues have a far simpler, more immediate, less nuanced market to operate in: long or short is the question?
 
While we also believe investors should be aware of all sides, as information and opinion is key to the positions we take. But if Brexit bores you or worse, your mind is closed; read no further.

So Howard Jones of Event Risk FX Ltd, writes this week on why, in his mind, the reality beyond the Brexit noise is clear and when the dream ends and we awake, all will be clearer still.

Alice, 42 Not Out.
And here we are. Anyone who witnessed the hysteria and vitriol in the House of Commons, after they had been recalled this week could only conclude that the chasm between political views is unbridgeable.

In a world resembling Alice in Wonderland, we have Remain trumpeting the Sovereignty of Parliament, whilst actually wishing to subordinate Parliament to Brussels.
 
We have the Brexiteers attempting to shut out Parliament, whilst desiring to re-establish Parliamentary Sovereignty.

Liberal Democrats, surely the most blatantly opportunist group of modern politicians to ever exist on these shores; wish simply to reject the referendum result, despite being the first party to propose one.
 
"Bollocks to Brexit" and the near deification of Guy Verhofstadt are somehow central to their pledge to unify the country. Bizarre.
 
And Labour seems to still be sitting on the fence, hoping to gerrymander the House after a General Election, to get their vote for Remain.

True Colours?
 
Meanwhile 42 MPs sit in the House, having either changed party allegiances or been suspended by their own party.
 
They claim to represent their constituents, but none have the nerve to resign and fight a by-election in their new colours. I wonder why that is?

We have in effect a House of Commons that is paralysed. They oppose No Deal, but cannot agree on a deal.
They have no confidence in the current government, but dare not vote for a General Election.
 
They proclaim outrage at the "Coup", and how Parliament has been stymied. But they are duplicitous in the extreme. What they desire is unaccountable power to do as they wish. They are behaving like an elected oligarchy, with no allegiance to manifesto pledges.
 
They are secure in their tenure for five years. They fear the electorate, but feign democratic outrage when they believe Parliament is being thwarted.  Yet three years after the referendum and endless debate, we are still here.
 
So many of us are forced to conclude that the rump which sits in Westminster, in opposition to Brexit, afraid for their livelihoods, are motivated by self-preservation, with little or no regard for what might be good for their constituents or the country at large.
 
The greatest wrath must be turned on the 42, who continue to bat, to stay the course, fulfil their own agenda, rather than test the will of the electorate.  Where is the accountability in that?
 
Out the Other Side
 
Now I'm bullish on the U.K.
 
Our assets are under-priced, and sterling, especially against the Euro, is undervalued.  But unfortunately we have political stalemate.
 
Personally I think that ultimately democracy must win, and we will then leave. But it will be an increasingly bitter, if that is indeed possible, few weeks as the Remain faction fight desperately to reject the referendum, whilst hiding behind expressions like "People's Vote", " Government of National Unity", "Coup" and other such Doublespeak.
 
A negotiated deal of some sort would be preferable, but not if it subjects the U.K. to the will of a foreign Parliament or Court.
 
Betraying Brexit will lead to decades of turbulence as injustice festers. It will be forever remembered as an institutional and elite move, to block the will of the people
 
A new "Cause" will emerge and most of us in the U.K. know what that entails.
 
Get it right, leave with a proper Brexit, and this country can then establish itself as a beacon of free trade, lighter touch regulation, lower taxation and non-discriminatory immigration, that welcomes talent from around the world.
 
That is a country you want to be a part of and have significant investment exposure to.”
By Chris Eagle on 01/09/19 | Currencies


We like to hear different voices, different viewpoints, that is what makes markets. This week we have comments from Chris Eagle of Aquila Markets, who is co-operating with RJMG, and more particularly with Event Risk FX, our FX venture.
 
Chris will typically include more trade focused material in his commentary, which we omit here.
 
Although he can be contacted (see below) if you wish to receive or review such detailed material.
 

 
How long will this remain true, asks Chris Eagle

I periodically mention this famous phrase from Nixon’s treasury secretary, which was said to the other members of the G10 in 1971 in Rome, after Nixon had taken the dollar off the Gold Standard and ushered in the current system of floating global exchange rates. Reflecting on the events of the past few weeks, and finishing reading "Fear", by Bob Woodward (which I regret not reading sooner and I would encourage anyone who hasn’t read it to read it as soon as possible), I have come to realise that Donald Trump becoming the President of the United States was a defining moment.

This is an individual who the world has to come realise has no plan, has no plan to make a plan, has no strategic objectives that are in any way realistic, and whose basic understanding of economics is nonsense.

He has no concept of the link of US/Global security to the US economy, nor does he care to learn. He is surrounded by a team who now will not challenge him, unlike his original cabinet which tried to. In a nutshell, he does not recognise, nor wish to recognise, what the US Dollar represents to both the United States, and the globe at large.

This has been bought into sharp focus in the past week. China has finally had enough of pandering to him, and is calling him out. The G7 meeting was effectively a slightly lame Biarritz beach party, where many of the very significant global issues that could have been on the agenda were lost in an argument about Amazonian rain forest destruction and insults to wives.

In the middle of this, Trump’s stream of consciousness made the world recognise several things; what he says is nonsense. It may be the case that he makes statements that are true, but this is a coincidence. He makes no effort to be truthful, so it is impossible to handicap his statements.
 
Central Bankers Return to the Issue of Reserve Currency
 
For this reason, arguably the most interesting speech given at Jackson Hole, the annual summer retreat for central bankers, was by Mark Carney, Bank of England Governor, where he set out openly a topic that the world has clearly been talking about behind closed doors for some time- we now need a new currency, to act as a corner stone for global commerce: a new reserve currency, not controlled by any one nation, but a currency for all. More importantly, it is not the US Dollar.

After all, the world has realised that the US system of government, with a constitution that can elect an executive who can act in ways that harm both his own nation and the globe, is no better or worse than any others, so from time to time it simply does not work. Having the key medium of exchange for global commerce effectively controlled by this nation is now intolerable.

Is the very act of engaging with Mr Trump now seen internationally as proof of folly?
 
It is for this reason, that the US administration’s negotiating style is being called by the counterpoints. As a poker player, when you know the guy across the table just bluffs every hand, you wait for a decent set up and call him hard. When you know that the rest of the table knows this too, and they are going to do the same, it becomes even easier.

China has made it clear they have had enough of the trying to deal with Trump, whilst Macron walked out of a joint press conference leaving Trump alone. In response to his sudden desire to talk with Iran, President Rouhani rules out a meeting until the US lifts sanctions. In short, they know that trying to engage in dialogue with the US is pointless. Meanwhile, Kim continues to test fire missiles in North Korea, fairly clearly supported, or at least not hindered, by the Chinese.

An increasing pace of replacing the US Dollar as the global reserve currency seems inevitable, but the US and its media seems to believe that this will not happen, and that US exceptionalism will triumph. I don’t believe it will, and I believe we have crossed a Rubicon in terms of global reliance on the US Dollar. The consequence for the US is stark; who will fund the budget deficits that have allowed the US to live beyond its means for so long?

How might the decline of the US Dollar as a reserve currency happen?
 
In the medium to long term, it is clear we can make an increasingly strong case for a structural Dollar decline. Additionally, as the US Federal Reserve cuts interest rates, as I believe they will (whether they should is another matter), this may well stifle rather than encourage demand, thereby increasing saving, and not consumption.

An apparently counter intuitive phenomenon, which we have seen in both Japan and Europe, as we cross the zero bound of interest rates. The absence of growth or a reliable return on investments just leads to people stockpiling un-invested cash. This is simply not supportive of funding investment and generating economic growth.

Trying to create a new reserve currency
 
Replacing the dollar will not be easy or quick. Of course history is littered with attempts to do so. But perhaps this time the explicit ‘weaponising’ of the currency to further unilateral action, as with Iran and a clear intent to use dollar clearing to shut out nations from the global financial system, accompanied by aggressive attacks on the balance sheets of foreign banks that refuse to conform, will finally tilt the balance.

The misallocation of global resources is a crippling price to pay for this imperialism; that Nero appears now to be in charge, can hardly help.
 
While the path down from reserve currency to ‘also ran’ is a long hard one, once it commences, it tends to only lead one way.

A nation that from such strength chooses to embrace decline and weakness will pay a high price.
 
Chris Eagle.
chris.eagle@aquilamarkets.com
By Howard Jones on 04/08/19 | Currencies
There is always an issue when we carry pieces from different authors that viewpoints and styles might clash, but that is just what makes markets.

This week we hear from Howard Jones of Event Risk FX, our foreign currency arm.

Forewarned is forearmed - Howard has a clear "bring it on" approach to sterling's recent dive. Perhaps it is useful to see the other side to the "my, oh my" pessimism of the mainstream press, or perhaps it just confirms that view, if you are already convinced.
 

"Crisis, Crisis”.

 
For those rock aficionados amongst you, the next line from that Mike Oldfield composition was of course "You can't get away!”
 
So here we are. The chief cheer leader of Project Fear has again hit the headlines forecasting doom and a currency crisis, if the government has the temerity to respect democracy, in the teeth of opposition from Brussels.
 
Mark Carney, the most political Bank of England Governor I can recall, has been here before.  His forecast of recession and 250,000 job losses in the event of merely voting for Brexit in 2016, was a little off the mark. . . .By a million or so.
 
The hysteria about leaving the EU without signing up to a patently undemocratic Withdrawal Agreement is gathering steam. As exit day approaches, the Institutional Remain camp and the fifth columnists within the Tory party up the ante.
 
But for now we'll concentrate solely on the exchange rate.



What is clear is that Sterling is in a long term down trend. It has encountered numerous "crises" during that time. You may ask "however did we all survive", but survive we did.
 
The word "crisis" is much overused and simply designed to inflame anxieties and sell media space.
 
If the pound goes down, or up, there is always some media wag who will seek out a vested interest group, who would have been on the wrong side of the move.

Such is the hysteria that the desire to remove "uncertainty" has even led our luminaries at the CBI and many others, to plead for a single currency.
 
Remember the threatened plague that would descend on us if we didn't adopt the Euro? Well we survived that crisis too.

Why is a floating exchange rate a good thing?

Let's be clear. A floating exchange rate is extremely desirable. It is the safety valve that allows our economy to absorb the inevitable tensions that evolve between trading nations. It allows millions of people to fix the value of a currency, as opposed to a single mandarin sitting in Threadneedle Street or Frankfurt.
 
No matter what his or her qualifications are, I'm afraid the market knows better. We buy and sell according to our own views and collectively we set a rate that is in some kind of equilibrium.
 
That freedom for the exchange rate to act as a buffer is something that many in the Eurozone look upon with envy.
 
Let the currency move up and down. Let us all be the judge of where it should be, and stop fixating on it and attempting to gain political points by forecasting
problems.
 
The real problem would be if the exchange rate could not move.
 
Here is why – a fixed-rate ‘system’ prevents the market from making adjustments when a currency becomes over or undervalued.
 
Effective management of a fixed-rate system means we would need a large pool of reserves to support the currency when it is under pressure.
 
And inevitably there would develop a ‘black market’ in currencies – we have seen this situation with developing countries. Neither of these is desirable in a world centre of finance, like London.

So what about zero interest rates?

And let's look at a world of zero interest rates. Where does monetary stimulus come from? More QE? We're still not even sure it works.

Carney has been assisted greatly during his tenure by helicopter money. Nothing to do with him, but each and every PPI claim does the trick for him. In penny packets, but heading towards £50 billion now. A pretty direct boost to consumption, largely free of tax or in the case of legal costs, funnelled through so called "tax efficient" structures.
 
But even that must end, but will be no doubt replaced with other stimulus. 

Look around the world

It's no surprise that Abe's Three Arrows to stimulate the Japanese economy involved a weaker currency.

Germany has also been the great master at engineering a weak currency in order to capture market share. Although how long they will put up with being Italy's banker, as a result, remains a moot point.

China and many more nations in the East have done the same.
 
And here we are, creating a crisis out of the fear of a weaker currency.

We should be counting our blessing, ever thankful we ignored the pleading of our establishment to join the Euro. Imagine the straight jacket that would have forced upon us.
 
And whilst at it, let's just assume that "No Deal" Brexit creates a real bump in the road. 
 
Far from certain of course, because there are supply chain management staff in most organisations who have had this hanging over their heads for two years and more, and we’d like to think that they haven’t entirely been idle in this time.

What if we do have a short period of recession?

So, let us say we have a recession. We've had them before, and the floating exchange rate ensures that we recover from them (unlike certain Eurozone members).
 
And ultimately if a few percentage points off short term growth is the cost of democracy, who on earth would turn that trade down? Imagine if the American colonists of 1776 had been deterred by such worries.
 
Perhaps the New York Times and their Davos Man followers should consider such things, when they next issue their apocalyptic analysis on Brexit.
 
So in conclusion, holding out and refusing to sign the undemocratic Withdrawal Agreement may lead to something of an economic slowdown, but we have the tools to adjust.
 
No fixed exchange rate, no growth and stability pact and if Carney wishes to pursue more QE, he can do so without Frankfurt pulling the plug on his bloated balance sheet.
 
Sorry Mike, but we can get away.
 
Be thankful, not frightened.”
By Howard Jones on 23/06/19 | Currencies

We have not heard from Howard Jones on the Foreign Currency markets for a while, as the story of dollar strength seemed pretty unyielding, but we do sense that a turning point is at least back on the table.

"Europeans have long been envious of the reserve currency status of the US dollar. The often quoted lament of French president Giscard D'Estaing of "America's exorbitant privilege" revealed a desire to somehow undermine that position.

Reserve currency status indeed brings advantages, which most of us are familiar with. But it also frequently leads to over valuation, encourages borrowing and debt via lower rates (exacerbating boom and bust) and may lead to global events influencing monetary policy, instead of the usual purely domestic considerations.

The desire for reserve currency status was certainly part of the Euro dream. Brussels has long wished for an upsurge in Euro holdings, a sign of virility and confirmation that their dream is unfolding. So how has it done?

Here is a graph of global euro reserves.



In essence, it's gone nowhere and it's unlikely to do so, until we see a fully integrated fiscal policy, within the Euro zone. That means a Euro zone debt market, and a common bank deposit insurance scheme. It means a pooling of revenues and liabilities. As it stands the European Project is half finished. It's in No Man’s land, neither one thing nor the other.

Without full fiscal integration the Euro will remain a flawed concept. How you get that radical change past Berlin is the real challenge, because Germany is the real winner from the current arrangement.

See the graph below to see how.



This graph sums up the instability of the Euro zone. Since the introduction of the Euro, the German current account surplus has gone from basically flat to 8.5% of GDP. Look at this chart of current account surplus against GDP.



Let me repeat that extraordinary number, 8.5%.

So, which nation epitomises a mercantile approach to trade, hiding behind a weak currency, "stealing" our jobs and upsetting international partners? China is of course the perceived bogey man. Take a look at its actual trade surplus, in dollars this time.



Which shows a very different trend and a similar size surplus, despite representing a much bigger economy (over three times the size) than Germany.

To borrow a phrase, "Not Good". The White House clearly has the EU in its sights, Germany in particular. And this is at a time that the Euro zone falls ever further into a deflationary spiral, with the European Central Bank scrambling to find its way out.

Draghi the ECB president, last week in Sintra, made it clear he will (once again) do anything in his power to fight off this deflation. Will more Quantitative Easing follow? Will the Germanic block countenance it?
And indeed is it effective?

There is a school of thought that argues that the stimulus from QE is all achieved via currency devaluation.

And this is where the eye of the White House is watching. Any attempt to drive the Euro lower will be met with indignation from the USA. ‘Beggar thy neighbour’ has become the covert policy of Germany since the introduction of the Euro. They are a major destabilising force within Europe, but also on a global level.

German efficiency is a myth as anyone with direct experience of its frequently dire infrastructure and archaic financial services sector knows.  German currency manipulation is its secret ingredient. With regard to trade, they are part of the global problem.

So where does the ECB go next?

Rates are negative. A weaker currency will incur the wrath of Trump, and you can be fairly confident, if nothing else from him, that tariffs will follow.

Is massive fiscal stimulus an option, perhaps with a growth and stability pact as a central ingredient of the EU policy? Many would love it, both Macron and Salvini for instance. But no chance, that duo will most likely not agree on the time of day.

The Euro Zone is locked in a Vice. Every which way the ECB turns they will be thwarted.

Germany needs either to commit to fiscal union, absorb and pool all national debts, and issue joint bonds and indulge in massive fiscal transfers. Maybe then part of that "exorbitant privilege" will become a reality.

Or it needs to leave the Euro and go back to the Deutsche Mark. That would liberate much of Europe, including those stagnant client states to the East, restore normal trade balances, and reduce international tensions both within and outside the EU.

If this comes about partly because of pressure from the White House, much of Europe may just be thanking the Americans again for re-establishing the balance of power within their continent, the ultimate economic irony created from political dissonance.

But no, it is not something we expect to happen. If nothing else it would be an odd reward for fiscal prudence. But we do sense this stalemate can’t last a great deal longer in the absence of decisive action. In valuing the Euro that underlying tension should not be forgotten.

Howard Jones
Event Risk FX Ltd

More information about the relative currency valuations of Germany and China are to be found in this paper. This is based on their current account positions and the degree of misalignment – visualised. 

Here is the crucial graph from this paper:


By Howard Jones on 07/04/19 | Currencies

This week Howard Jones comments on Brexit, sterling, the Euro. We tried so hard not to revert to this topic, not to turn up the volume on it, but it can't be done.

To a lot of people, indeed to some in the markets, it might still just be noise, but we sense a turning point has either passed (you can of course never tell) or be coming.

NETWORK

Dig deep and recall that memorable phrase from the 1976 film, a satire on the monstrosity of media. "We're mad as hell, and we're not going to take this anymore!"

In previous market updates, I have looked at market implications for Brexit, and very early on discussed how a Brexit betrayal would undermine the institutions of governance.

Mrs May's 'consultation' with Jeremy Corbyn

What I didn't expect was a Tory prime minister granting a hard left socialist opposition leader a platform to portray himself as both a statesman and saviour of the U.K.

May has thereby single-handedly promoted the wisdom of Jeremy Corbyn over and above that of her Cabinet.

Not that that is a particularly high bar.

But never again can the Tories assert that Corbyn is not fit to lead. Their very own leader has invited him to do just that. He has legitimacy, courtesy of May.

It might not matter much, save for her core strategy always being to vote for her, simply because she is not Corbyn. That card will be rather harder to play now.

Tories up and down the land are apoplectic with rage.

In Opposition the Tories always claimed to be anti EU, only to then fold when in power and take the soft option, be it over Maastricht (their fault) or now letting Blair's Lisbon stand.

Their relationship with the establishment and the big business lobbyists is just too cosy.

So we are faced with a soft Brexit - political implications

This is not Brexit by any normal definition, which the markets will interpret as "good". The conditions are so vague and one sided, they will finally expose May's Tories for what they are. Any claim they have to competency in government is a myth, and has become plain for all to see.

So is Corbyn's Labour now a 'shoo in' for government?

It looks that way, unless there is some regicide in the Tory party that goes deep into the ranks of those who have sat idly by, indeed acquiesced, whilst May has called the tune.

Sterling and U.K. assets may well still rally on a soft "Brexit", but I expect the rally of betrayal to be fairly short lived.

The idea of a Customs Union, where the 5th largest economy in the world outsources its trade, and numerous other policies, to an unelected council of foreigners, will not be tolerated for long, once the scope of betrayal is apparent.

Discontent is rife in the EU too, as this map shows, where the split between an unhappy core and a contented periphery is clear.

Is the share price of National Grid a proxy for a Labour victory?

As an aside do watch the share price of a typical big utility, now lined up for seizure by a nationalising Labour Government. Take the case of National Grid, just too profitable for its own good, as a fairly good barometer of Corbyn's chances of leading a majority government.

If it rallies, his hopes are fading, if it sinks, despite interest rate expectations falling, investors are clearly voting with their cheque books. A 6% yield is looking rather Italian to me, for this bond proxy. Its share price has indeed fallen steadily since the debacle of the May general election.

What of this EU, which so many of our informed opinion makers are so keen to align with?

By align, I mean, take our orders from, tie our destiny to and most significantly, hide from reality with. Take a look at stagnation personified here; a glimpse of the reality.

The ECB's strategy

Well a German recession is now looking likely too. The ECB is tapped out in terms of bond purchases and interest rate reductions, having never even got started with unwinding their quantitative easing experiment.

The doom loop whereby the biggest holders of weaker sovereign debt are the domestic banks of those same wrecked economies rolls on. This is fuelled by the state myth that a bad economy can have good banks, which ensures that bank balance sheets and sovereign debt become ever more inter-dependent. They will bring each other down once that folly is understood and Draghi can't load the ECB with more junk bonds.

So forget Italy, we know that's shot.

Let us take a look st France

A 98% debt ratio to GDP means it is set to become the 4th largest debtor in the world this year.

56% of that debt is held by overseas investors, outside the government's control. When they run, just don't get in the way.

And here's a staggering statistic. 46% of GDP is already collected in taxes (the OECD average being 34%).

The ability of the French government to further raise taxes is clearly approaching zero.

Look how the diesel tax was received, along with the sleight-of-hand of collecting two years' taxation in one, by eliminating the arrears principle.

The supine British let HMRC do that, the French clearly care more and that (as much as the fuel tax the pliant media wants us to focus on) is what keeps the desperate gilets jaunes out on the streets. If the government takes half what you make, and then one year doubles it, what do you then actually live on?

The point being that the very core of Europe is under stress.

In "Charlemagne in Waiting" I cast Macron as desperate to be head of the new European Empire, but aside from his own ambition, he badly needs to get his hands on German money. The trouble is it is now the inexperienced, entitled, vacillating, Louis XVI that he is starting to resemble. Vanity too keeps him going and staves off the day when he too must obey a Swiss banker, at which point his time too will be up, although at least in his case, he should reach exile in Brussels.

Under what conditions might the EU actually survive?

Europe desperately needs full fiscal integration and fast if it is to survive.

I said before that the Euro won't get through another recession without it, and I have seen nothing that convinces me otherwise.

Europe is not a rock of stability. It is a low growth area, it has a falling share of world trade, and it stifles entrepreneurship. Where are the great European tech start-ups? They do exist, flourish for a while, but seem light weight when the true giants come calling. Name one leading university in the world that resides in the EU 27.

As they say, "America innovates, China imitates and the EU regulates".

The Euro remains a short.

And as anti-democratic individuals and institutions force the U.K. into being a rule taker from the EU, then the more likelihood there is of a tumultuous period in the U.K. as well.

Howard Jones

By Howard Jones on 17/03/19 | Currencies

This week Howard Jones looks at what has become a major challenge for fund managers this year, namely the sharp gyrations of sterling.

Where performance is measured daily and sterling is the base currency, it is becoming a true test of skill in hedging, for international investors.

The high drama of U.K. politics has been riveting. If this were a soap opera, and there are certainly similarities, the script requiring a Grand Finale, or indeed an additional season, could not have been better written. The set is strewn with bodies, the boss held captive by secretive powers, hungry lieutenants jockeying for power, revolutionaries at the wall (well on College Green), the money man a flitting shadow paying off all and sundry. And the ideal cliff hanger scene (https://www.rte.ie/news/analysis-and-comment/2019/0315/1036688-backstop-deal-cox/) is set, with old clan leaders in the background now in the pay of foreign states, elderly cast members struggling through the series, and others waiting to be written out before the next season starts, if they still can't agree on their excessive pay.

Sterling has consequentially been the most volatile currency, with an overall solid gain as the fear of "No Deal" gets priced out.

To see MPs back a motion to seek to block no deal under any circumstances, was confirmation that most of our representatives have no idea about negotiating.

If you ever wanted justification for rejecting the short termism, opportunism and populism of representative democracy, this was it.

Politics have a huge bearing on currencies. Markets tend to extrapolate events, probably to exaggerate their significance. Then those with foreign exchange exposures, who have not been paying attention, are forced into trading decisions, thereby extending and amplifying the impact. As we have argued before, we nearly all have such exposures, although how keenly we recognise them varies greatly.

What does this mean for Sterling? Previously I wrote about this scenario, terming it a 'Rally of Betrayal' and suggesting we could see the pound rise to £1.35-£1.40 against the US dollar.

Although that strength only holds until the fury of the baffled, frustrated, weary electorate is unleashed on the Tory administration. Although as ever the timing of the day of reckoning remains uncertain.

That view was all predicated on Corbyn keeping his poise, holding his fractious party together and gaining from the shambles of the Tory leadership.

The subsequent Labour issues, with both their tolerance for a noisy minority peddling anti-Semitism and indeed their own split over Europe, perhaps makes the great socialist revival a little less likely.

So if all currencies are now pigs, which one would you kiss?

I suspect there will be an element of randomness here, and as we are destined to be forever more European, our politics may well morph into something rather similar: numerous parties, coalitions, and (more) extended periods of no effective government.

And actually seeing how our representatives work, rather cynically, that may not be a bad thing for a while.

At the same time the real threat to Sterling, of a 1970's style socialist government, has we feel been reduced. The Labour Party, oddly strengthened by those defecting MP's, still has a serious core that can fight, even if only intermittently, for some version of sanity and responsible opposition.

But there is much dissatisfaction in these isles aimed predominantly at those that govern us. That is not a good long term development. For all the false dawns of realignment we have lived through, I sense the cracks really are deepening this time.

Yet for now I suspect Sterling will hold its gains and we may well see a period of consolidation around £1.40.

We should not forget either the odd stability and fiscal responsibility (https://www.bbc.co.uk/news/business-47318862) of this Chancellor.

Virtue is unpopular, as it often is, and two faced, as it is prone to be, but the years of if not quite austerity, then at least restraint, are lengthening. The day we might actually stop fresh borrowing, quixotic and brief though that dawn will be, slides gently closer.

The Euro as we know has its own problems. It remains a liability currency in my view.

The Sterling Euro rate of 1.25 would then also seem a reasonable result, if indeed the pound moves up against the dollar.

 

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