Diminishing returns

More money

An engineer called Professor Peter Woodward says the HS2 rail track between London and Crewe will not be safe for high-speed trains. He says it should be laid on concrete instead of the gravel allowed for by the paltry £55.7bn budget. More money must be spent.

That was also the conclusion reached by the governing council of the European Central Bank on Thursday. Not only did the ECB cut its deposit rate from -0.3% to -0.4% and lower the refinancing rate to 0%, it said it would increase its money-printing asset purchases from €60bn to €80bn a month. Maybe the professor should have a word with the ECB: it could cover his shortfall simply by extending the programme for a month. Nobody would notice. 

Investors did notice Thursday's announcement though: it was just that they didn't much of it, despite the new measures ticking just about every box on their checklist. They were sort of alright with it until the ECB president Mario Draghi said in his press conference that interest rates could fall no further. Given the current programme's lack of success (inflation has fallen from 0.7% to 0.3% since it was announced last January), investors were not convinced that another €20bn a month would be enough to get inflation back up to 2%.

Higher euro

Sig. Draghi was also fairly clear that the ECB is no longer trying to weaken the euro. Although it would doubtless prefer to see its currency at a lower level, the governing council is pinning its hopes now on pumping more money into the €Z economy. So up went the euro.

Since Thursday morning, a few hours before the ECB announcement, the euro has strengthened more than any other major currency. Granted, it has not risen far - one and three quarter US cents and half cent against sterling - but a stronger euro does nothing to help inflation towards its 2% target. 

What it did do was carry sterling ahead in its wake. The pound is up by one and three quarter US cents from Thursday morning's levels and is firmer by an average of 0.4% against the other dozen most actively-traded currencies. Only the northern Scandinavian crowns (and of course the euro) did better. 

Fewer data

Given the minimal impact of Friday's economic statistics, the lack of any today should not trouble investors. They missed the most interesting numbers on Saturday morning when China published its figures for retail sales, industrial production and urban investment.

The 10.2% annual increase in Chinese urban investment (construction and fixed assets) was slightly ahead of forecast but the 10.1% rise in retail sales fell short of predictions. The 5.4% increase in industrial production was also a disappointment, although it is sure to look better than the equivalent Euroland figure due this morning: 1.5% is pencilled in there.

And that is the only ecostat on today's agenda. Tonight the Bank of Japan is expected to keep policy unchanged.