Sterling sustained

Post hoc ergo propter hoc
British haggis has been banned in the United States since 1971 because it contains sheep's lung. After pondering the problem for 44 years, Scottish producers revealed a brilliant solution yesterday: lungless haggis for the American market. The announcement galvanised demand for the pound. 

At least, something must have encouraged investors to buy sterling on Monday. It certainly wasn't UK economic data or verbal intervention by the Bank of England that got them going, for there was none of either. So, more by accident than design, the pound found itself in the lead, strengthening by an average of 0.4% against the other dozen most actively-traded currencies. It went up by exactly that much - half a cent - against the euro and gained slightly less against the North American dollars, the yen and the Australian dollar.

The OECD's Economic Outlook may have contributed to the pound's success with its UK growth forecast of 2.4% next year and 2.3% in 2017. Those numbers were as close as makes no difference to the United States' 2.5% and 2.4% and appreciably ahead of Euroland's 1.8% and 1.9%.

Club Med wobbles
The news out of Athens and Lisbon did the euro no favours. In Portugal a presidentially-imposed government looked set to be toppled by a left-leaning coalition. In Greece the concern was that Brussels remains unsatisfied with the reforms which are a condition of fresh bailout payments.

Euroland leaders will not be overjoyed by the prospect of another anti-austerity government rocking the boat and there must also be concern at the lack of progress on the "prior actions" in Greece that must be carried out before the bailout cash begins to flow. A €2.15bn payment scheduled for this week has been postponed because the Tsipras government has failed to satisfy the EC with its measures for mortgage foreclosures and bank regulation.

Nobody is panicking yet but petty problems on the periphery of the euro zone have an unfortunate habit of turning nasty.

Today's lukewarm topic is inflation, with consumer price index data from China, Norway and Greece as well as import and export price indices from the United States. The governor of the Reserve Bank of New Zealand will be speaking tonight.

This morning's numbers from China did not make pleasant reading.  Headline CPI inflation slowed from 1.6% to 1.3% last month and producer prices - factory gate prices - continued to fall at an annual pace of -5.9%. Australian business confidence took another downward turn, falling from 5 to 2. The positive number means businesses are still, on balance, optimistic but not very.

The inflation figures from Norway are the only ones likely to have any impact on exchange rates but the Greek numbers could influence investors' view of peripheral Euroland. Tonight RBNZ governor Graeme Wheeler will be talking about financial stability and might have something to say about the Kiwi. His oration will be followed by Chinese production and retail sales data.