The proud pound

Half a job
Earlier this year there was excitement at the discovery of Captain Kidd's shipwrecked treasure off the coast of Madagascar. It now transpires that the ship is not that of Captain Kidd and the treasure is lead, not silver. That's how Greece must be feeling after the IMF's comment last night.

The International Monetary Fund, supposedly one of the architects of the bailout deal, has let it be known that Greece will need "debt relief on a scale that would need to go well beyond what has been under consideration to date". It sounds as though the package agreed on Monday morning was yet another Eurofudge, designed not to provide a full and lasting solution to the problem but to paper over the cracks sufficiently to hide the problem for long enough to make it someone else's problem in the future.

Investors seem to have seen this coming. They dealt out no fresh punishment to the euro on Tuesday, leaving it roughly steady against the US dollar and the Japanese yen. The Norwegian krone was the weakest performer by a fraction, despite a slight recovery in oil prices.

Carney pop for sterling
The Bank of England governor told parliament's Treasury Committee yesterday that "the point at which interest rates may begin to rise is moving closer". As a statement of the blindingly obvious it was unparalleled (assuming time is indeed linear) but investors became terribly excited and sent the pound north.

Sterling jumped an immediate cent higher against the euro and the US dollar and drifted further upwards during the rest of the day. It strengthened by an average of 0.8% against the other dozen most actively-traded currencies. The gains included one and two thirds of a US cent and one and a half euro cents. The smallest among them was four fifths of an Australian cent.

Mr Carney's observation came little more than hour after the Office for National Statistics revealed that UK inflation in the year to June was 0.0%. The figure was exactly in line with forecasts and made no difference to the pound. It was a different story for US retail sales. Instead of rising by the expected 0.3% in June they were down by that much. The news knocked the dollar back by half a cent.

British jobs and North American rates
This morning's highlight will be the UK employment data, which should show a further acceleration in wage increases. After lunch the Federal Reserve chairperson will give her biannual testimony to Congress and the Bank of Canada will announce its monetary policy decision.

All of those will have a bearing on investors' expectations for interest rates. The same is true of the New Zealand inflation figures which come out tonight.

As for sterling, anyone with foreign currency to buy should consider getting some of it done today. The pound is close to multi-year highs against the Aussie, the Kiwi, the Loonie, the euro and the rand.