Super Mario reappears

Partial serenity

In the end the Bank of England governor had no difficulty defending himself at the Treasury Committee hearing yesterday. He responded to the suggestion that last month's relaxation of monetary policy was an overreaction to the Brexit vote by saying, in effect, "Ah, but what if we hadn't done it?"

Mark Carney described himself as "absolutely serene about the judgments made by both the MPC and FPC" around the time of the referendum, claiming partial credit for the "bounce-back" in sentiment. However, Mr Carney and his colleague Jon Cunliffe left open the door to a further rate cut, with Sir Jon saying he would expect to vote for one this year if the economy were to play out according to the bank's forecasts.

Investors did not share the governor's serenity about the situation and sent sterling lower. They had already been put into a selling mood during the morning when, although UK industrial production rose by 0.1% in July, the figures for manufacturing production showed a -0.9% fall. Sterling was the weakest performer on the day with an average loss of -0.5%. 

Loonie's lurch

There was no shortage of other ecostats on Wednesday, though none of them had any massive impact on exchange rates. The most surprising reaction was to an apparently anodyne statement by the Bank of Canada when, as expected, it left its benchmark interest rate target unchanged at 0.5%.

Investors dissected the BoC statement to extract words like "less certain", "downside" and "financial vulnerabilities", using them as an excuse to send the Canadian dollar a cent lower. The damage was not lasting though, and by the end of the day the Loonie was just about back to where it had been before the BoC statement. It added a net half-cent against sterling.

Data released overnight showed Japan's economy expanding by 0.2% in the second quarter, not much in absolute terms but a whole lot better than the expected 0.0%. Trade figures from China gave room for optimism about the global economy: Although exports were down by -2.8% year-on-year imports increased by 1.5%. Both figures beat analysts' forecasts.

The only game in town

By far the most important event today will be the European Central Bank president's press conference at half past one. Although no changes are expected to be made to interest rates it is highly likely that ECB president Mario Draghi will have something to say about quantitative easing.

It is almost a given that Sig. Draghi will announce an extension to the bank's current asset-purchase programme, which would otherwise come to an end this month. Less certain is what changes the bank will make to the list of securities which it permits itself to buy. The assumption is that there must be some relaxation of the strict qualification criteria or the ECB will run out of things to buy.

There are no UK or Euroland ecostats on the agenda. Canada reports on building permits and house prices.