Central Banks centre stage

Sceptics all

It was 13 years ago that Polyanna W Bush made his "mission accomplished" speech, announcing a new era of harmony in Iraq. Yesterday, Polyanna Putin announced that Russian forces will withdraw from Syria now that peace has been restored. Today Polyanna Kuroda said Japanese growth is on course for 2% next year. 

That may indeed be the case but central bankers, like presidents, are duty-bound to be optimistic. They must believe that their actions will lead to the achievement of their objectives: If not, those actions would be pointless. However as with M/s Bush and Putin, their audience can often be sceptical. Just as investors were not totally convinced by the European Central Bank president last Thursday, they did not swallow the Bank of Japan governor's every word this morning when he said more time was needed to assess the effect of the negative interest rates introduced in January.

Also as with the ECB announcement, today's BoJ action - or more accurately the lack of it - was positive for the currency: certainly not the desired outcome. The yen was the top performer over the last 24 hours, strengthening by 1.5% against the pound.

RBA minutes

For all its lack of drama, the BoJ policy announcement was just about the day's most exciting event. Its only competitor for investors' attention was the publication of the Reserve Bank of Australia minutes, which also took place overnight.

The minutes of the 1 March RBA board meeting, when the Cash Rate was held at 2%, had a slightly more cautious tone than before. Although the employment situation has improved in recent months the RBA noted its concern about low wage growth, low inflation and market volatility. Investors picked up on the minutes' penultimate sentence, which said that "continued low inflation would provide scope to ease monetary policy further…". In the previous minutes that "would" had been "might", so the possibility of a rate cut appeared to have increased. The syntax took some of the shine off the Australian dollar but it was down by just a third of a cent on the day.

Monday's only ecostats were for Euroland industrial production. Although they exceeded expectations, with monthly and annual increases of 2.1% and 2.8%, investors were unable to become excited by them and the euro had to settle for a half-cent gain against sterling and the loss of half a US cent.

US retail sales

Compared with Monday's agenda, today's is absolutely teeming with ecostats. However, the only one of any great significance is this afternoon's US retail sales number.

European data this morning cover French, Swedish and Italian inflation and Euroland employment change. After lunch the United States reports on New York manufacturing activity, producer prices, business inventories, international capital flows, house-building and retail sales.

The retail sales figure is the one to watch, especially in view of tomorrow's rate decision by the Federal Reserve. A strong number ought to help the dollar.