Sterling suffers

Look away

Charlie Lyne, a journalist, used crowd-funding to raise £5,936 to protest against censorship. He used the money to make the British Board of Film Censors sit through a ten-hour film he directed, entitled Paint Drying. It received a U certificate, unlike the PG awarded to Sterling Sinking.

It is more than a month since sterling last came away with the day's wooden spoon. Unfortunately for the pound there was no contest for it on Wednesday. Sterling's smallest loss was of -0.2% to the NZ dollar and its biggest was a -1.2% fall against the Swedish krona. On average the pound was down by -0.7%, equivalent to one US cent.

Investors were at a loss to explain exactly what had provoked the broad sell-off. The day's only UK ecostats - for house prices and mortgage approvals - were not bad enough or important enough to have started the rot. So the pound's decline was attributed to increased nervousness about the EU referendum, a pretext that will serve the writer handily until the plebiscite takes place.

Central banks on hold, for now

Both the Federal Reserve and the Reserve Bank of New Zealand kept their benchmark interest rates unchanged overnight. They both nodded to "international developments" and "uncertainty about the strength of the global economy" as factors in their decision-making process.

The Fed's statement was careful not to place too much emphasis on international developments. The committee would not have wanted to give the impression that it was more concerned about global asset prices than about the domestic US economy. So, for now, the steer is still towards further rate increases this year. The dollar weakened on the announcement but not by much and not for long.

There was a different reaction to the RBNZ statement, partly because it had a more nervous tone ("there are many risks around the outlook") but mostly because of a throwaway comment in the penultimate sentence that "further policy easing may be required over the coming year". The Kiwi reacted badly and, unlike the US dollar, was not able fully to recoup its instant two-cent mark-down.

GDP and durable goods

The two most prominent items on today's list are the initial stab at UK fourth quarter gross domestic product and US durable goods orders. The first is already a month out of date and the second is a crapshoot but both are closely-watched by investors and can often provoke currency movement.

Analysts calculate that GDP in Britain expanded by 0.5% in Q4, a slightly better result than the 0.4% growth achieved in Q3. Given that the world is relatively boot-faced about sterling right now, a figure of 0.5% or higher could be positive for the pound. US durable goods orders are expected to have fallen by -0.6%, mainly as a result of a decline in transportation items (bombers, aircraft carriers, motor cars and suchlike). Excluding transportation a -0.1% decline is predicted.

Once again, be ready for spikes and troughs.