Yen rebounds after QE setback

A new Bushism is wheedling its way into mainstream English usage. "Nuclear" weapons have been a feature of the airways for years but mercifully, thanks to good old spell-check, crop up only rarely in written media. The latest oddity, "pre-ordering", is very much a creature of the written word and seems to be associated mainly with Apple products. It is no longer sufficient for customers to order the latest iThingie; they must pre-order it. If they later decide to buy a second one for their partner presumably they have to re-pre-order it. 

For one member of the Bank of England's Monetary Policy Committee (MPC), a pre-order for more quantitative easing (QE) would be appropriate. The minutes of the committee's September meeting said he believed that "given the weakness in demand, a good case could be made at this meeting for announcing more asset purchases." He failed to make that case though, and together with his eight colleagues he voted to continue with the current programme that will have run its course in October. "For most members this decision was relatively straightforward", although some members "felt that additional stimulus was more likely to be needed in due course".

All in all it sounded like no new decision until November. Investors were reassured to learn that the MPC was not burning with desire to keep the printing presses running forever so they looked kindly on the pound. It didn't do a whole lot though, edging higher against the euro and the commodity dollars and losing ground for a second day to the Swedish krona. The US dollar did better, adding half a cent against the pound.

But the surprise winner - and a clear one at that - was the Japanese currency. Having strengthened by one yen following the Bank of Japan's QE announcement the pound spent the rest of the day falling back by two. Judging by the timing of the yen's decline and rebound, investors in Europe and North America were less taken aback by the BoJ scheme than their colleagues in the Far East had been.

Wednesday's ecostats were generally unremarkable. Euroland construction output was slightly down, Swiss business confidence a touch higher. US housing starts and building permits were in line with recent months. The only surprise was US existing home sales which leapt by 7.8% in August, their biggest monthly increase for a year.

This morning's announcement of another Japanese trade deficit failed to dent the yen and a narrowing of Switzerland's trade surplus had no effect on the franc. A busy pre-lunch session will deliver figures for Swiss industrial production, Italian industrial orders and a full set of provisional Euroland purchasing managers' indices, together with the UK retail sales numbers, the CBI's industrial trends survey (factory orders) and a Spanish ten-year bond auction. This afternoon brings US weekly jobless claims, the Philadelphia Fed's manufacturing survey and euro area consumer confidence. A handful of Federal Reserve presidents will give speeches.