Keeping calm

Kiwi lands
The Oxford English Dictionary has just revealed the "word of the year". In the past, it has invariably been a word. This year it's not a word at all but an emoji, a smiley face. Timing: nil points.

Nevertheless, investors were inclined to put on a brave face yesterday as western financial markets opened for the first time after the carnage in Paris. The tilt towards safety seen earlier in the Far East gave way to a resumption of business as usual, with the South African rand and the Japanese yen swapping places. The rand was the top performer overnight with a gain of 0.6% while the yen was down by -0.5%.

Overall, however, it was the New Zealand dollar that fell furthest, with a two-cent drop equivalent to -0.9%. The main part of that move took place during the morning in London. There were no data or other announcements to precipitate it: The word on the street is that a single large sell order was responsible, which may have been motivated by technical considerations.

Don't panic
The main story on Monday was one of dogs not barking. For the most part the economic data were unremarkable and central bankers avoided providing fuel for any flames that might have been lurking. On average, sterling was just about unchanged on the day.

The finalised consumer price index figures from Euroland put the headline rate of inflation at 0.1% with the core rate (ignoring food and energy prices) at 1.1%. Both numbers were a tick above forecast but nobody cared, given the near-certainty of further easing by the European Central Bank. The only ecostat that did make a difference was the sharpish -1.5% monthly fall in Canadian manufacturing shipments. It sent the Loonie lower at the time but caused no lasting damage.

Two ECB bosses had speaking engagements; President Mario Draghi and board member Benoit Coeure. Neither rocked the boat. Sig. Draghi's oratory was delivered behind closed doors and M. Coeure reassured investors that the ECB is "sensitive to the consequences that our monetary policy can have on financial stability".

Inflation again
The numbers to watch today will be the CPI data from Britain and the United States. Important supporting roles will be played by euro zone investor sentiment, NZ dairy prices and US industrial production.

Headline inflation in the UK is forecast to be unchanged at -0.1% with the core rate also steady at 1.0%. The equivalent US figures are pencilled in at 0.1% and 1.9%. As far as the interest rate outlook is concerned, the most important readings are the American ones: any divergence from the forecast numbers would be likely to alter expectations of a December rate increase.

For the euro the only ecostats that matter are the ZEW measures of German and pan-euro-zone investor sentiment. For the Kiwi dollar the fortnightly Global Dairy Trade index, which comes out sometime after lunch, has shown itself to be hugely influential in recent months.