A sea of red

Sterling out of fashion

Studies on both sides of the Atlantic have found that women are charged more than men for haircuts and makeup. They also apparently enjoy paying up for "girly" products such as pink ballpoints or razors. This could explain why women are no longer buying sterling: it isn't expensive enough.

The pound resumed yesterday its run of bad form after Monday's false dawn. It fell by -1.6% each against the euro, the Swiss franc, the Japanese yen and the Scandinavians. Sterling's average loss on the day was -0.9% and it is down by twice that much in the year to date. 

To an extent, sterling's undoing was a function of a renewed nervousness among investors that sent them running for cover in the safe-haven currencies (among which, at the moment, the pound is not numbered). The IMF didn't help matters when it lowered its forecast for global growth and other symptoms of the uneasiness were falling energy and equity prices overnight.

Carney corrodes confidence

A far bigger factor in sterling's decline was a speech by Bank of England governor Mark Carney, in which he moved the goalposts for a rate increase further toward the horizon. Its impact on the pound was severe and sustained, knocking a cent and a half off Cable over the following three hours.

The title of Mr Carney's speech, "The Turn of the Year", was a self-deprecatory tilt at his guidance last July that "the decision as to when to start such a process of [interest rate] adjustment will likely come into sharper relief around the turn of this year". Yesterday he conceded that "the decision proved straightforward" at this month's meeting. Now, "The outlook for monetary policy depends on three things: the MPC's objectives, its strategy, and the UK's economic prospects".

In other words, Mr Carney hasn't a clue when the first rate increase might come but it will not be any time soon. That revelation was inevitably damaging sterling. With the cat now comprehensively out of the bag it remains to be seen whether the downward pressure will continue but, with the referendum out there as well, it quite probably will.

Jobs, inflation and sentiment

Sterling's next test will be today's UK jobs data, which are expected to leave unemployment unchanged at 5.2%. US inflation comes out after lunch. The New Zealand inflation figures released last night caused the Kiwi to take an even bigger hit than the pound.

NZ consumer prices fell by -0.5% in the fourth quarter, taking inflation down to 0.1%. The news led to the NZ dollar falling even against sterling. It is down by -0.3% on the day. The UK employment data - especially those for earnings growth - will have to be a lot better than expected to work a miracle on the pound.

The biggest shadow over financial markets today is confidence. Global equity indices are a sea of red and there is a renewed rush to safety.