Pound rebound

Predictable or what?
A Korean chap called Bae Sang-moon asked to be excused national service so he could play golf. Amazingly, the court denied his request. Every analyst in the world expected the RBNZ to cut its Official Cash Rate to 3% this morning. Amazingly, it cut the OCR to 3%.

The response of investors to the Reserve Bank of New Zealand's rate cut was, on the face of it, surprising. They sent the Kiwi two cents higher. To an extent, the reaction was a result of earlier suspicion that the cut could be even bigger. However, it was driven mainly by the gentle wording of the RBNZ announcement. Where, a couple of months ago, the governor described the strength of the NZ dollar as "unjustified and unsustainable", today's statement simply said "further depreciation is necessary".

Since Graeme Wheeler made the unjustified-and-unsustainable comment in May the Kiwi has fallen by 15% against sterling and by 5% against the Australian dollar. It is not that investors think its descent is complete - or indeed that they expect no further rate cut - but the wording of today's statement leads them to think that any future decline will be less aggressive. 

Sterling unchecked
Having lost a fight for the wooden spoon on Tuesday the pound was let off the leash yesterday by the Monetary Policy Committee minutes. It narrowly beat the NZ dollar to the top spot, strengthening by an average of 0.6% against the other dozen most actively-traded currencies. 

Whilst the MPC minutes continued to show a 9-0 majority in favour of keeping the Bank Rate at 0.5%, they revealed that a significant factor in that decision was the uncertainty surrounding the euro (the meeting took place very shortly after Greece voted No to austerity). With that problem now at least temporarily solved investors expect a more hawkish line in August.

The pound went up by half cent against the euro and the US dollar. Its biggest gain was of two cents - 1% - against the Australian Dollar and its smallest the quarter-cent it took from the Kiwi.

Retail sales
Retail sales have a near-monopoly of today's ecostats. There are two sets of data from Britain (the official figures for June and the delayed CBI Distributive Trades Survey for July) and one from Canada (the official data for May). 

Sterling starts the day little more than a cent short of its highest level against the euro since November 2007. The UK retail sales numbers could mean the difference between an upward break and a profit-taking sell-off.  If the Canadian figures are not an improvement on the previous month the Loonie will almost surely come under pressure.

Other ecostats worth watching today are Swedish unemployment, UK mortgage approvals, US jobless claims and Euroland consumer confidence. The South African Reserve Bank announces its monetary policy decision after lunch: many - though not all - analysts expect the benchmark repo rate to be raised from 5.75% to 6%.