The calm before the calm

Attack of the doves

It was another day of muted activity in the FX market and another day of no change, on average, for the British pound. The day's top event - the FOMC minutes - came out too late to affect the London session.

Running to around 8,000 words, reading the minutes of the Federal Open Market Committee meeting is not the work of an idle moment. That is why most investors get somebody else to do the reading for them.  And what those somebody elses came away with yesterday evening was the idea that the FOMC is not in a tearing hurry to tighten monetary policy. "The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time,' below levels that are expected to prevail in the longer run."

Investors are still inclined to expect a rate hike on 13 December but after yesterday's apparently dovish minutes they are not exactly treating it as a gimme. The US dollar was already on the defensive when the minutes came out and it subsequently lost further ground, eventually taking the day's wooden spoon. It lost two thirds of a cent each to the pound and the euro.

Twiddling thumbs

Not a whole lot was going on yesterday away from the FOMC story. A handful of central bankers took turns on the dais but none of them gave the currency market much to work with. Ecostats were few and far between.

Investors seemed fairly satisfied with the situation in Catalonia. They believe, trustingly, that the Madrid government will take control of the situation and it will all blow over. The euro, like sterling, was unchanged on the day against the Swiss franc, the Australia, Canadian and NZ dollars and the Norwegian krone.

The only UK ecostat was the RICS house price balance. It revealed that they are still rising, on average, but at 6% the index was barely positive.

Euroland and the States

In the coming two days the focus will be on the euro zone and the United States. There are plenty of data on the agenda and a dozen appearances by central bankers. There is little on the list with any obvious potential to affect sterling.

There are inflation data today from France (1.1%), Sweden and Portugal and producer prices from the US. The speakers include the Bank of England's chief economist, the European Central Bank's president and a couple of FOMC members. Friday brings the trade figures from China, the important data for US inflation and retail sales and the provisional Michigan index of consumer confidence as well as another handful of senior ECB and Federal Reserve speakers.

Also on Friday the IMF and the World Bank will kick off their annual conference in Washington. No great breakthrough is expected but there could be some hints about future monetary policy.