Financial markets are often mocked for their volatility. One of the remarkable aspects of the present chaos at Westminster is how little turbulence it has caused in the City.
Some observers have compared the present political imbroglio to September 16 1992, the day that the pound was ejected from the precursor to the euro area, the Exchange Rate Mechanism. So far it has been nothing like that.
The most shocking aspect of the ERM moment for most ordinary households and businesses was what happened to interest rates. They were first raised to 10 per cent, then 12 per cent and then 15 per cent in defence of sterling.
Reuters reported that in latest trading sterling ‘tumbled on opposition to PM May’s deal.’ The actual fall was 0.5pc which dropped its value to $1.3102 against the dollar
If that were to happen today, the Bank of England’s stress tests for the safety of Britain’s banks would be blown out of the water.
Reuters reported that in latest trading sterling ‘tumbled on opposition to PM May’s deal’.
The actual fall was 0.5 per cent, which dropped its value to $1.3102 against the dollar. But given that sterling has been fairly steady around the $1.30 mark for most of the past year this could hardly have been considered a major setback.
Some currency strategists have suggested that, in a No Deal Brexit, sterling would fall to parity with the dollar. If that were the case one might have expected far more movement by now.
One of the disappointments about sterling’s depreciation since the referendum is that unlike the exit from the ERM it doesn’t seem to have had the same positive impact on exports.
This reflects the fact that our biggest trading partner is the EU bloc, which has still to fully recover from the euro crisis of 2010 and again looks in danger of falling into recession.
There is a distinctly different tone about the disruption of Brexit from the British Chambers of Commerce – a reasonable proxy for the small- and medium-sized enterprises in the UK – compared with that of larger FTSE companies (with the exception of the supermarkets).
The BCC is in an apocalyptic mood while executives and investors in global FTSE groups seem to regard the whole Westminster farce as an annoying sideshow.
Indeed, some of Britain’s most internationally exposed firms continue to defy gravity. Shares in pharmaceutical giants Glaxosmithkline and Astrazeneca, tobacco firms Imperial Brands and BAT, as well as China favourite Burberry, all rose strongly on the Brexit muddle in anticipation of higher earnings when local currency income is translated back to pounds.
The political shenanigans involving a deeply divided Tory Party, rudderless Labour and a seemingly immoveable DUP almost have made the financial markets look rock steady.
Of more concern is Euro sclerosis and an inverted yield curve in the US (when short-term bond yields are higher than long-term) which is regarded as a recession signal. High-jinks on College Green largely are, for now, being ignored.
The Serious Fraud Office often finds itself under fire for its failure to bring successful prosecutions in high-profile cases. Its director, Lisa Osofsky, recently took flak over the decision to drop long-standing investigations into senior officials at Rolls-Royce.
So there will be understandable relief that at the second time of trying it has won convictions against a former managing director at Barclays, Colin Bermingham, and a former vice-president, Carlo Palombo.
They conspired to fix Euribor interest rates and scooped millions of pounds in bonuses as a result.
Britain has in the past gone to the European Court of Justice to defend the bonus structures at banks, arguing that it is necessary to keep the City competitive.
But the Libor and Euribor scandals demonstrate that having the wrong incentives in place can be extraordinarily damaging.
The Euribor market may appear divorced from everyday reality. But as Osofsky rightly notes, it supports £140billion of financial products, including personal loans, pensions and mortgages for ordinary citizens.
The expected opening of share trading in ride pioneer Lyft today, to be followed by far larger competitor Uber soon afterwards, will add new layers of wealth to San Francisco, the broader Bay area.
Financial advisers Wealthfront, which uses robots to help millennials invest, says that the float will create a further 6,000 dollar millionaires in one of America’s richest regions. Pity that the new riches are not being more broadly shared with drivers on the front line.