Pound defies Brexit fears
THE latest ‘ Remain’ poll showing a solid majority in favour should not be that surprising. Of all the institutions and corporations which have warned of the dangers of Brexit, the Bank of England and the International Monetary Fund have the most integrity and are most trusted.
Both may, on too many occasions, have fluffed their economic projections, but forecasting has never been an exact science, and while technocrats may have the best data, realpolitik and poor judgment can get in the way.
When the governor of the Bank of England, Mark Carney, suggested that Brexit could lead to a ‘technical recession’ at the Inflation Report press conference, he was only following what the data has been telling him and the Bank’s respected cadre of economists. Yet the word ‘recession’ was bound to have a chilling effect on public opinion. Never mind that if you place the qualifying word ‘technical’ in front of it you are suggesting a temporary, rather than a more permanent setback.
Certainly, much of the recent survey data suggested that the economy was hitting the buffers. But the official figures from the Office for National Statistics over the past week have shown something else. Consumer price inflation (CPI) shows no signs of accelerating towards the Bank’s 2pc target. The number of people in employment in Britain is at a record level and retail sales zoomed up in April by 1.5pc, confounding even the most upbeat forecasters.
So far from bearing down on confidence, as the ‘Remain’ camp would like to say, consumers seem to be spending regardless.
All of this will be a little disappointing to George Osborne and HM Treasury. The latter has thrown its customary and hard-won objectivity out of the window and uses every press release as a chance to throw cream pies at those who advocate ‘Leave’.
The truth is that such lower growth that is being seen is largely due to events beyond these shores. This includes increasing stresses in the fragile eurozone, geopolitical factors from the Middle East to the South China Sea and the Asian slowdown. As for the upsurge in inflation, it is taking time to materialise. Wage inflation is well under control (despite near full employment) and the much-envisaged collapse in the pound, that was to raise import prices and hurt us all, is not happening. It is not likely either, given that China is willing to dump surplus materials such as steel on global markets at subsidised prices.
In spite of all the forecasts of a mini-sterling crisis, the pound looks remarkably resilient. In latest trading it climbed to a threeand-a-half-year peak against the euro and a two-week high against the dollar.
Some might argue that the pound’s recovery against the euro is a response to the better ‘Remain’ polling.
Balderdash. It began long before then. Travel mayhem ONE has to have a little sympathy for travel and airline group Thomas Cook in the current volatile climate.
On the day the company gave its pre-close update on trading, Brussels airport came under attack. As it released its half-year results bulletins, speculation of a terrorist attack on an EgyptAir flight from Paris to Cairo was being broadcast.
The combination of terrorist events and a cautious forecast were enough to send the company’s shares skidding by 19pc.
Followers of Sky Atlantic’s new series Billions, starring Damian Lewis as ruthless hedge fund trader ‘Axe’, will recognise how a bad event can be a trading opportunity. 9/11 provided Axe with his first billion as he shorted every airline, hotel and travel share he could get his hands on.
Peter Fankhauser at Cook has been doing all he can to shore up his business in the wake of the reputational damage done by the Corfu child deaths. He has coped with the Tunisia beach killings and more recently the Ankara and other Turkey bombings. Responses to customer complaints have been speeded up, the airline upgraded and travellers recycled to the Western Mediterranean, Bulgaria and other destinations.
But German customers are reluctant to travel to Turkey and flights through Cook’s Brussels hub are badly affected.
Remarkably, amid the gloom that saw revenue fall in the past six months, Brexit has been the bright spot. Ignoring the predictions of pestilence, British consumers are flocking to the US and other longer distance destinations for their travel.
Trump land has lost none of its appeal. Long goodbye IF BARCLAYS and a group of former executives hoped that the Serious Fraud Office investigation into the bank’s emergency Gulf fund raising in October 2008 would go away, because it took place so long ago, they will be disappointed.
The SFO has told the High Court that it should be ready to make a decision on prosecution by early next year. Enough time perhaps for Barclays to sue for peace by accepting a ‘deferred prosecution agreement’ which would consign the past to the dustbin.