A couple of weeks ago the remains of Yorkist King Richard III were unearthed from a car park in Leicester, where they had lain since his death at the battle of Bosworth Field in 1485. His present-day admirers are calling for the remains to be reburied in York. Now, according to the Daily Mail, their campaign has received support from beyond the grave. A piece on the paper’s website today is headlined; “Richard III’s ancestors demand York burial”.
If they are successful, perhaps they can arrange for the debased pound to be interred alongside the deformed monarch. Both are equally unpopular. Only last Friday evening one of the big three American ratings agencies told sterling to “despair and die”. Moody’s decided the time had come to downgrade Britain from Aaa to Aa1, patriotically sharing the news first with US financial markets well after London had gone home for the weekend.
Quite reasonably, New York dealers marked down the pound on the news, knocking nearly a cent off its value against the euro and the dollar in currency exchange. When the Far East opened for business this morning traders there did likewise. At one point sterling was down by more than two cents from Friday’s opening levels. It was not so much that everyone was astonished by the downgrade; it had been on the cards for weeks, if not months. But there is a certain propriety to these things which investors must observe. A downgraded currency must be sold.
So sterling starts today a cent and a half lower against the US dollar, the Swiss franc and the New Zealand dollar compared with Friday’s starting levels. It is down by one euro cent, one Australian cent and two thirds of a Canadian cent which is useful information if you are interested in using Moneycorp send money online service. Against the yen it is unchanged, because the Japanese currency has its own problems. The yen took a dive this morning after the name of Haruhiko Kuroda was attached to the governor’s job at the Bank of Japan. Were he to get the job, investors believe he would embark on aggressive monetary easing. And even if he doesn’t win the appointment, the other candidates (of whom nobody has also never heard) would adopt a similar strategy.
But everyone knows who Mark Carney is. The UK-educated Bank of Canada governor, who will take over the top job in Threadneedle Street this summer, will give a speech to the Richard Ivey School of Business this afternoon, followed by a press conference. Unless his audience is utterly witless or the governor stonewalls on the matter, Mr Carney will have to make some response about sterling and the UK downgrade.
There isn’t much else going on today though. One of China’s two manufacturing purchasing managers’ indices came out earlier at a lacklustre 50.4; barely positive and two points lower on the month. Italy’s balance of trade this morning will attract less attention than the second day of its general election (only in France or Italy could a general election take two days). British Bankers’ Association mortgage approvals will be irrelevant to sterling in the light of the Moody’s downgrade. And that’s pretty well it for the day apart from a couple more speeches by US and Australian central bankers.
After America was downgraded by Standard & Poor’s last summer the dollar went up and US government borrowing costs went down. Don’t expect the same things to happen on this side of the Pond.