Two…

Interpretation
Facebook again: this time it's serious. The cat video website is said to be considering a "Dislike" button alongside the existing "Like". Having catered to both extremes, the next obvious move would be a "Don't care" button. It would have come in useful yesterday.

Investors certainly didn't care for sterling. It shared last place with the Swiss franc and the Swedish krona. The rot set in after the consumer price index data for August showed UK inflation slowing from 0.1% to 0.0%. Never mind that the figure was exactly in line with analysts' forecasts, or that the retail price index showed inflation accelerating from 1.0% to 1.1%: investors could see nothing in the numbers to encourage the Monetary Policy Committee to increase interest rates any time soon.

They took a more charitable view of US data which showed retail sales increasing by 0.2% and industrial production falling by -0.4% in August. Both numbers were softer than forecast: sales were supposed to be up by 0.3% and industrial production should have fallen by only -0.2%. Nevertheless, investors did not think the data were bad enough to discourage the Federal Open Market Committee from increasing interest rates tomorrow, should it be minded to do so.

Milking the Kiwi
Tuesday's top performer was the NZ dollar, which strengthened by two and a half cents against sterling. The Kiwi found support after the fortnightly Global Dairy Trade index showed milk prices rising by 16.5% for a third successive increase after five months of decline.

The NZ dollar also benefited from a broader appetite for commodity-oriented currencies, which was part of a risk-on mood among investors. European and American stock market indices were all higher and even the Shanghai equity index went up this morning.

That is not to say there is a universal expectation that US interest rates will remain unchanged tomorrow. The two schools of thought are as vocal as ever and both have plausible arguments. A compromise point of view has it that the Fed will raise its Funds Rate by a tiny amount, say 10 basis points (a tenth of a percentage point) or even less. By doing so, the argument goes, it could begin to normalise rates without scaring financial markets.

Jobs on the line
The UK employment statistics come out this morning. They will be as important to the pound as this afternoon's inflation figures will be to the US dollar. The Euroland inflation data will be of less significance to the euro.

The negative reaction to yesterday's anodyne UK inflation figures suggests that investors would not take kindly to below-forecast jobs data today. They will want to see continued growth in wages and a further decline in jobseeker numbers.

Investors are not expecting much from the US consumer price index figures, which ought to put inflation at 0.2% for a second successive month. But any lower number would be seen to impair the possibility of a rate increase tomorrow and, therefore, the dollar.