Fed? No

Plumbing the bottom
Nigeria's newly-elected parliamentarians have wasted no time bringing in legislation to share the nation's oil wealth. They are starting with themselves. Senators will each receive a £69k clothing allowance and a further £20k to buy wardrobes. But boy, will they look good. Unlike the naira, which is trading close to all-time lows.

It isn't the only currency plumbing multi-year troughs. Even without scraping the barrel one can find the NZ dollar at a five-and-a-half-year low, the Australian dollar at a six-year low, the Japanese yen at a seven-year low and the South African rand at an all-time low. Delving further to include such as the Turkish lira and the Moroccan dinar the list becomes longer.

To an extent it is because investors have considerably more confidence in sterling than they did in the aftermath of Northern Rock (remember that?) and the global financial crisis. Only the Swiss franc has outperformed the pound since the beginning of this year. But it is also the case that investors are becoming more wary of risk, specifically the risk of rising interest rates and what they might do to the global economy.

Deflation ends
The UK consumer price index data yesterday morning were not really very good. Headline inflation was on track at 0.1%, bringing to an end four weeks of deflation, but five of the other ten measures were below forecast. Despite that, soon after the data's publication the pound headed higher.

The upward move coincided with the release of ZEW's indices of investors sentiment in Germany and Euroland. The two forward-looking measures were substantially lower than expected. Given investors' current disenchantment with (or detachment from) the US dollar, and the steady retreat of the yen, anyone selling euros because of the ZEW numbers had only one place to go.

The pound strengthened by an average of 0.3% - half a Swiss cent - against the other dozen most actively-traded currencies. It picked up a third of a US cent and half a euro cent. Australia's dollar was down by a cent and a half at the back of the field and New Zealand's was not far ahead with a one-cent loss.

Jobs and minutes
In theory the highlight today is the Federal Reserve's monetary policy announcement at seven this evening. In practice there is not likely to be any change to US interest rates. So the ones to watch will be the UK employment numbers, the MPC minutes and Euroland inflation.

Inflation in the euro zone is forecast to be unchanged from the provisional reading at 0.3%. The MPC minutes are expected to show, once again, all nine members voting to keep the Bank Rate steady at 0.5%. It would be a surprise if the UK jobs numbers were not to show a continued fall in jobseeker claims.

That being the case, sterling should be alright as long as the Fed does not spring a surprise rate increase. If it does, start digging.