Sterling on the line


A ski group's encounter with a snow leopard sounded worthy of shouty media headlines until the rest of the story became clear. It didn't happen on the piste in Verbier but in a Kashmir forest popular with snow leopards. Attention has now turned to today's meetings in Doha and Brussels.

The meeting in Qatar will feature the oil ministers of Russia and Saudi Arabia: the one in Belgium will be between Britain's prime minister and one of the EU presidents. There is guarded optimism that the former will result in an agreement to cut oil production and the latter will improve Mr Cameron's hand ahead of the EU referendum.

Even without an oil agreement investors were more bullish about risk assets on Monday. Oil itself ended the day 14% above last Thursday's lows and almost every major stock market was higher (except Canada and the States, which were closed). By and large the commodity- and energy-related currencies came out best and the safe-havens were left behind.

New week, new ideas

Canada's dollar and South Africa's rand were the biggest beneficiaries of investors' improved risk-appetite, both strengthening by 1%. Sterling was steady against the euro and the Swiss franc whole the NZ dollar was the unlucky loser, down by half a cent.

A week ago it looked as though there had been a volte-face in investors' perception of central bank stimulus. Instead of seeing it as a positive for asset prices they saw it as a sign of weakness. This week things seem to be back to normal. (If you can call this pantomime normal). The prospect of lower euro interest rates, the possibility of more intervention by the Bank of Japan and some reassuring words from the People's Bank of China all served to improve investors' mood.

The day's unexpected casualty was the NZ dollar. It took a tumble overnight when the Reserve Bank of New Zealand published its quarterly survey of inflation expectations. Consumers had marked down their expectation of inflation over the next 12 months from 1.51% to 1.09%. Investors believe the change makes a rate cut more likely.

Inflation and Brexit

The statistical focus today will be on the UK inflation data at half past nine. A headline rate of 0.3% has been pencilled in by analysts. The outcomes of the oil meeting in Doha and the anti-Brexit meeting in Brussels will also be of great interest.

All three will have a bearing on sterling. Cheap oil is a major influence on the uncomfortably low UK inflation rate and therefore, in turn, on the Bank of England's reluctance to increase Bank Rate. OPEC output cuts would be seen to "improve" that situation.

The possibility of Brexit is also assumed to be a contraindication for higher rates because the Bank will not tighten ahead of the vote and neither would it do so if the vote were to leave. It all adds up to appreciable event risk for sterling today.