Pangloss lives

Tearing up the rule book
In his latest book Anthony Horowitz, the successor to Ian Fleming, portrays James Bond as an anti-smoking feminist teetotaller. It coincides with speculation about who might play the part of 007 in the next movie. David Beckham is up for the job as, apparently, is Xiao Gang.

The head of China's Securities Regulatory Commission is already something of a hero for his contribution to the authorities' two-month-long effort to stabilise Shanghai equity prices. Their efforts certainly bore fruit over the last 24 hours: Investors decided that fresh stimulus measures by the authorities in Beijing would put the Chinese economy to rights and that everything would be for the best in the best of all possible worlds.

So on a day when Japan confirmed a slowing economy, China reported a slump in international trade and Australia revealed a collapse in business confidence the behaviour of exchange rates was the diametric opposite of what would be considered normal. The safe-haven Swiss franc and Japanese yen took a -1.5% hammering while the antipodean dollars went up by 1% and the South African rand strengthened by more than 2%.

Sterling unchanged
Whilst it would be an exaggeration to describe sterling as an oasis of calm in the midst of FX market tumult, the pound was relatively steady on Tuesday. It was unchanged on average against the other dozen most actively-traded currencies, adding two thirds of a US cent and more than one euro cent. 

The euro received no help from an upward revision, from 0.3% to 0.4%, to second quarter Euroland gross domestic product. The US dollar received none from an improvement in the US National Federation of Independent Business index of business optimism. And that was about it for the London session. 

There was a similar lack of reaction to Australian figures this morning which showed a decline in consumer confidence and slower-than-expected growth in mortgage lending. The Aussie did, however, soften slightly after the deputy governor of the Reserve Bank of Australia said the weak currency was helping support economic growth.

Central banks
Sterling's success - or otherwise - today will depend in large part on the data for UK manufacturing and industrial production and, to an extent, on the July trade figures. There are interest rate announcements from the Bank of Canada this afternoon and the Reserve Bank of New Zealand tonight.

Although on an annual basis UK manufacturing production has been growing for two years, the monthly change is erratic. Negative numbers today could undermine the pound. Today's other ecostats include Greek inflation and industrial production and Canadian housing starts and building permits. Tonight brings the Chinese inflation and Australian jobs data.

No change to interest rates is expected from the BoC today but analysts are almost unanimous in their expectation that the RBNZ will cut its Official Cash Rate from 3% to 2.75%. In theory, the cut is so widely-expected that it should not affect the Kiwi. In theory.