Flight to safety?

Not so funny
Researchers have discovered that the funniest jokes are those which are direct and easy to follow. A paper in Human Nature, written by a team at Oxford University, claims that "jokes that are too complicated tend to lose the audience". That would cover yesterday's FX market then.

It was billed as a "flight to safety" (pun unavoidable) after investors heard that a Turkish F-16 had shot down a Russian Su-24 which had encroached on Turkish airspace. The safety angle was clear enough in equity markets, because share prices retreated. It was less obvious among currencies though, because the prospect of a Russo-Turkish war was only one of the factors investors were trying to follow.

The first of those was a speech by Glen Stevens, the governor of the Reserve Bank of Australia, to the Australian Business Economists' dinner. He didn't quite go as far as to say their forecasts were rubbish but that was his gist. The second was an appearance by Mark Carney, the Bank of England governor, at parliament's Treasury Committee. He studiously avoided making any forecast about the timing of the first upward move for UK interest rates, simply saying they would remain low" for some time".

All over the place
As flights to safety go it was an odd one. The allegedly "risky" South African rand was the runaway winner with the antipodean dollars taking second and third place. Sterling came last, not far behind the US dollar, but the supposedly "safe" Swiss franc and Japanese yen did not do a whole lot better.

The argument behind the success of the commodity-related currencies seemed to be that heightened tension in the Middle East was positive for the price of oil, and that higher oil prices implied higher commodity prices too. In pursuing that tortured logic investors completely ignored the price of one of Australia' biggest exports, iron ore, which touched a ten-year low.

So the Aussie strengthened by two and a half cents against sterling, as did the NZ dollar, while the Canadian dollar picked up a cent and a third. The pound lost a third of a US cent and half a cent each to the euro and the franc. 

Autumn statement
The only hard-core economic statistics today are US durable goods orders, which investors respect for their unpredictability. For sterling the theoretical highlight will be the Chancellor of the Exchequer's autumn budget at half past twelve.

UK budgets, of which there are three per year, tend not to get sterling moving. However, it would be incautious to assume blithely that that will be the case today. The chancellor will, after all, be talking about the economy.

There are no ecostats of any great consequence from Europe today but several from the States. Durable goods orders will be accompanied by personal income and spending, weekly jobless claims, consumer confidence, new home sales and two more provisional purchasing managers' indices. The New Zealand trade figures come out tonight.