All change

Dollar dumped

There is some terrific economic advice in today's Daily Mail. Apparently there is no need to spend £1,190 on a "Chloe Faye" handbag: you can save £1,155 by buying something similar from Marks and Spencer. Investors made a similar discovery about the dollar yesterday.

They found out that there was no need to spend £0.695 on a US dollar: they could save a penny (or, as the BBC would say, one pence) by buying an identical item for £0.685. When London opened on Wednesday morning Cable was trading at $1.44; when it closed the rate was near to $1.46. Sterling enjoyed a net daily gain of more than one and a half US cents. 

But that was the pound's only daily gain: it was down by two thirds of a euro cent and made the same loss, -0.5%, on average against the other dozen most actively-traded currencies. Moreover, unusually for a day on which the Greenback carried off the wooden spoon, the top performer was the Canadian dollar.

Unholy trinity

Three things conspired to bring down the US dollar: The president of the New York Fed cast doubt on the interest rate outlook, the price of oil headed higher and the US services sector purchasing managers' indices continued to deteriorate.

William Dudley set the scene when he said "financial conditions are considerably tighter than they were at the time of the December [FOMC] meeting". The implication was that he saw no need to tighten them further by increasing interest rates. After lunch, of the two services sector PMIs, one was at a 21-month low and the other was the weakest in nearly two years. The dollar reacted badly to both of them. 

On the broad front sterling had been doing quite well before the PMIs came out. After they did, and when investors began to unload US dollars, the pound was trampled in the rush to buy euros (the quick and easy exit route for dollar-dumpers) and commodity- and energy-oriented currencies (higher oil prices encourage risk-appetite). 

Central bank oratory

The two focal points today will be speeches by the European Central Bank president in Frankfurt and the Bank of England governor in London. US jobless claims will be examined for clues to tomorrow's US employment data.

At eight this morning Mario Draghi will address SUERF, the European Money and Finance Forum. The nature of his audience will almost oblige him to talk about the outlook for monetary policy. At midday the Bank of England will publish its rate decision and the minutes of the MPC meeting. At the same time Mark Carney will present the quarterly Inflation Report. He, too, will have to offer an opinion on the policy outlook. Investors will hang on Mr Carney's every word; so might the pound.

Tonight brings Australian retail sales and the Reserve Bank of Australia's policy statement. Tomorrow comes the monthly change in US nonfarm payrolls. The payrolls number will be critical for the dollar.