Still waiting

Dollar gains on Fed statement
The European Commission has given TSG (Traditional Specialities Guaranteed) stature to Bramley apple pies. The news has irked those Up North who have long been waiting for Yorkshire pudding to be awarded similar status. And even greater patience is being demanded of investors waiting to hear of a US rate increase.

Many investors were hoping that yesterday's Federal Reserve policy statement would bring news that the Fed would increase its benchmark interest rate in September. Or that it wouldn't. Of course it didn't: to make such a prediction would be to give it immediate effect. So the lexicographers and semanticists set about deconstructing the statement to divine any hidden inference. They came to the conclusion that a reference to "'solid' job gains" and a need to see "'some' further improvement in the labour market" meant it was still game-on for a rate increase before Christmas.

The US dollar reacted positively to the Fed statement. It quickly strengthened by half a cent against the euro and the pound. For sterling it meant the reversal of gains made earlier on Wednesday, leaving Cable unchanged on the day. The euro extended the morning's decline, eventually losing one cent to sterling. 

Scandi split
The Northern Scandinavian crowns bracketed the other major currencies. In the lead was the Norwegian krone, which benefited from a further rebound in oil prices. The Swedish krona was at the back of the field alongside the NZ dollar. Sterling shared second place with the North American and Australian dollars.

Wednesday's economic statistics brought little to the party. Spanish retail sales were up by 2.3% in the year to June, missing the forecast 3.3% increase by a mile. US pending home sales, instead of rising by the expected 1% in June, were down by almost twice that much. 

The Australian dollar enjoyed a vaguely positive reaction to a speech this morning by Glenn Stevens, the governor of the Reserve Bank of Australia. He spoke optimistically about future business with China and said nothing whatsoever about the currency being overvalued.

Dollar hogs the spotlight
Although what went on in the second quarter of the year is not strictly relevant to what the Federal Reserve will do at the end of the third, investors will still take a keen interest in today's GDP data. Annualised growth of 2.5% is the consensus forecast.

Having stalled in Q1, partly as a result of bad weather, America's economy is supposed to have bounced back in the second quarter. Analysts think it did not quite match growth in Britain over the same three months but evidence of a return to respectable growth would probably be positive for the dollar this afternoon.

Spain and Sweden also reveal their preliminary Q2 expansion this morning. Germany reports on unemployment and inflation. The EC publishes its list of Euroland confidence measures. After lunch there is nothing on the agenda until midnight when the Gfk index of UK consumer confidence comes out.