Unlucky for some
A chap hired a Ferrari 458 last weekend to attend a wedding in Luton. His driving skills were not up to the job and he parked it under a Volkswagen in someone's front garden in Selbourne Road, hard by a 20mph sign. The Turkish lira looks equally unfortunate.
The lira touched another all-time low against sterling yesterday, having halved in value over the last five years. It was already weighed down by political concerns and the recent exodus from commodity-related and emerging-market currencies has worsened its situation. Tuesday's loss amounted to -1.4%. Among the major currencies only the Norwegian krone and the Australian dollar came close, falling by -1.1%.
New Zealand's dollar was unable to build on the previous day's gains. Investors had been optimistic that the Global Dairy Trade index would show a fortnightly increase in milk prices for the first time since March and indeed it did, with a 14.8% rise. But the Kiwi's subsequent one-cent rally was not enough to offset the day's earlier losses and it ended up with a cent-and-three-quarter deficit on the day.
Sterling leads again
For the second day this week sterling starts at the head of the field. It strengthened by an average of 0.6% yesterday against the other dozen most actively-traded currencies. It was the UK inflation data that did the trick.
The consensus among economists had been that Britain's consumer price index would be unchanged in July from the same month last year, leaving inflation at 0.0% for a second successive month. The actual number turned out to be 0.1%, sending investors into paroxysms of rapture. Their dramatic reaction was something of a surprise, given that the inflation figure was still miles away from its 2% target.
But dramatic it was, with the pound strengthening instantly by nearly a cent against the euro and the US dollar. Sterling has faded somewhat overnight but it is still carrying daily gains of nearly a cent against the US dollar and the euro. Over the last month only the euro has performed better, adding a cent and a half.
Dollar in the spotlight
Sterling will probably be taking the day off today in the absence of any UK data. The focus will switch to the US dollar with the American inflation figures coming out after lunch and the Federal Open Market Committee minutes due to be published this evening.
Analysts predict that US inflation will have ticked up from 0.1% to 0.2% in July with the core rate, which ignores the price of food and fuel, steady at 1.8%. At those levels or higher, the numbers should reassure investors that the Fed could still deliver a rate increase before Christmas.
Whether or not the FOMC minutes will deliver similar reassurance is a different question. If investors are hoping for hints from the committee of a September rate hike they are likely to be disappointed. And if they are disappointed the dollar could well come under pressure.