Anti-climax

Minutes fall flat
It transpires that the chap who shelled out $170m for a Modigliani painting last week put it on his Amex card.  Surely he must realise that his repayments will increase by $12,750 a month if the Fed raises interest rates in December?

For that is what the majority of financial market participants expect to happen when the Federal Open Market Committee convenes in four weeks' time. The minutes of the October meeting, published yesterday evening, confirmed that committee members were on the whole in favour of beginning the process of tightening monetary policy, just not quite yet. The implication was that they were hoping the conditions would be right by December.

The overall effect was one of anti-climax. Not only did the US dollar lose ground following the release of the minutes, it was accompanied on the way down by the "safe-haven" Japanese yen and Swiss Franc. At the same time the supposedly "risky" antipodean dollars and the South African rand gained ground. 

Broadbent boost
Bank of England deputy governor Ben Broadbent said yesterday that financial markets night have got the wrong end of the stick with the expectation that UK interest rates will not start to rise until early 2017. Investors took that as a warning that the move could come sooner. Sterling went up.

Although economists still tend to expect an increase next year, and futures prices assume it will have taken place by December 2016, Mr Broadbent noted that many investors were lining up with the bank's own inflation report, which points to January 2017 for the first increase. He said the market ought not to "focus obsessively" on the bank's projections and should instead make its own assessment of the economic fundamentals.

The pound reacted positively to Mr Broadbent's comments. For a second day it spent most of the London session moving higher before giving back some of that ground overnight. It took a net three quarters of a cent from the US dollar and the Swiss franc and strengthened by a proportionally-identical one Japanese yen. Sterling was unchanged against the euro and the Canadian dollar and it lost around -0.5% each to the commodity currencies and the Northern Scandinavian crowns.

Not the ECB minutes
At lunchtime the European Central Bank releases the "Monetary Policy Meeting Accounts". Their content could prove to be just as anticlimactic as the FOMC minutes but that doesn't mean they are not just as eagerly awaited. 

The accounts aim to describe the tone of the meeting without mentioning names. As such they could reveal the strength of support for the extension of quantitative easing which most analysts expect to be announced next month. Another central bank in the frame today is the SARB, which is expected to keep rand interest rates steady at 6%.

Sterling's highlight will be the UK retail sales data at half past nine. Analysts believe sales fell by -0.5% in October, both with and without the effect of food and energy.