Russell Lynch: Tin hats on as big money raises its bets against sterling

Holidaymakers in Europe have already had a taste of the pound’s weakness this summer, with sterling close to six-year lows against the single currency. The bad news is that there could be more pain on the way.

Predicting notoriously volatile currency markets is fraught with risk; when central bankers are asked for their thoughts, the usual delphic response is to arch a Governor’s eyebrow and say “some will go up, and some will go down”.

But a look at where the big money is going offers cause for concern for sterling bulls.

BNY Mellon is a custodian bank, sitting on some $30 trillion in equities, bonds and cash on behalf of the world’s leading institutions from central banks to pension funds.

As such it has a unique window to the flows in global currency markets. From early July, the big hitters, encouraged perhaps by more hawkish noises from Bank of England, were pumping money back into sterling.

But on BNY’s data, that trend appears to have ended with the inflation report a couple of weeks ago and money is flowing out again despite the message from Threadneedle Street that interest rates could rise more quickly than markets predict.

Throw in the political risks for sterling from the resumption of Brexit talks, Eurosceptic rabble-rousing at the Conservative party conference in October and then the EU leaders’ summit a couple of weeks later.

Then look across the Channel to a continent with relative political stability and an economy growing twice as fast: why would you buy the pound? It adds up to a very choppy autumn for sterling.

City spinners Bell Pottinger face more brickbats today as top brass are hauled before a panel of the Public Relations and Communications Association over its recent “work” in South Africa.

That would be the lurid allegations of stirring racial tensions to further the interests of its clients the Guptas, who are close allies of President Jacob Zuma.

The Rainbow Nation’s Democratic Alliance opposition made the original complaint and will doubtless have a few things to say at the PRCA hearing.

Boss James Henderson has said sorry for “inappropriate and offensive” mistakes, and sacked the partner involved, but his firm could face the ultimate sanction of being kicked out of the PR industry’s professional body.

Meanwhile PR land has spent a quiet August week smirking at Henderson starring in his own “Downfall” parody, with Bell Pott’s woes dubbed over Hitler’s rantings in the Berlin bunker.

Outrage is one thing, but when it turns to laughter you’re really in trouble.