Pound pops

Surprise sterling rallyette
Yesterday Leicester City, the putative premier division champions, released tickets for the team's last home match of the season. Prices on the illegal secondary market went ballistic, with some hopefuls asking up to £15k a pair. Sterling popped higher, adding a cent against the US dollar and the euro.

The two events were, of course, unrelated but strong overseas demand for Foxes tickets is no more whacky an explanation for yesterday morning's sterling rally than some of the others doing the rounds on Monday. Some suggested the reopening of parliament after its Easter break had rekindled faith in the pound. Others attributed it to the successful sale of a Scunthorpe steel works. More likely, some mega-bear decided to take profit on short-sterling positions and others were encouraged to do the same when they saw how easily the pound rebounded.

It strengthened by an average of 0.3%, picking up around a cent each from the US dollar, the euro and the Swiss franc. Sterling's biggest gain was the 1.1% it took from the Japanese yen, which suffered its own outbreak of profit-taking after having risen by more than 5% since the beginning of the month. Even after that the yen remains April's top performer with a gain of more than 4%.

Real interest
As expected, Monday's few economic statistics were of minimal importance or impact. Investors were more concerned with the further recovery of oil and commodity prices. Consequently, the antipodean dollars shared second place behind the South African rand. 

The biggest gain on Monday was by the Brazilian real, which rose by 2% against the pound. Once more it was politics not economics that decided its fate, when a congressional committee decided it would be appropriate to impeach President Dilma Rousseff. Rightly or wrongly, investors believe that the removal from office of Ms Rouseff would herald the dawn of a bright new day for Brazil.

Nobody much cared about the -0.6% monthly fall in Italian industrial output. They were far more interested in the prospect of a €5bn deal to bail out the country's weaker and more vulnerable banks, which will be funded by insurers, asset managers and the more solvent lenders.

This morning the focus will be on inflation across Europe. Germany was first out with its numbers and Sweden, Britain and Portugal will follow with theirs. The UK consumer price index is predicted to be 0.4% higher on the year.

Germany's figures were exactly in line with forecast, showing inflation steady at 0.3%. Sweden, Portugal and the UK are expected to come in a tick higher than that at 0.4%.

Nothing in those data is likely to change the outlook for interest rates. Investors have become inured to the idea of low inflation and low interest rates for the rest of time (even in the States there is no breathlessness about an imminent increase).  When inflation does remerge it might come as a shock but it won't happen today.