An unlucky streak
The Washington Post draws attention to a linguistic device used frequently by one of the American presidential hopefuls. The prefix "Many people are saying…" allows all manner of outrageous allegations to follow. For example: Many people are saying that quantitative-easing asset purchases will help the UK economy.
Be that as it may, to put the claim to the test the asset purchases must first take place. And on the second day of the Bank of England's latest £70bn project it came up short. The bank wanted to buy £1.17bn of 15-year-plus government bonds but could find sellers for only £1.12bn. The £70m shortfall might look tiny in the great £445bn scheme of things, and the bank will probably find it easier to get its hands on shorter-maturity gilts, but it was exactly the sort of PR that sterling does not need right now.
In fairness, sterling's decline on Tuesday probably owed more to a continuation of the McCafferty effect than it did to the QE glitch. Investors in the Far East had already had the first crack at MPC member Ian McCafferty's op-ed piece about near-zero interest rates: those in Europe simply continued their good work. Sterling's daily loss averaged -0.4% and it is down by -2.5% on the week.
Although the UK data for production and international trade played only a small part in sterling's fortunes they were lacklustre, to say the least. They were the only high-profile ecostats on yesterday's list.
The figures for industrial production were the only ones to pass muster, rising by an insignificant 0.1% in June and increasing by 1.6% on the year. The -0.3% monthly fall in manufacturing output was a touch weaker than expected, lowering the annual increase to 0.9%. Britain's trade deficit for the same month was wider than forecast at -£12.4bn.
Sterling avoided by a whisker taking last place for a second day, stealing a fifth of a cent from the Swiss franc. The franc has been on the retreat for a week, losing -0.9% to the euro as global risk appetite recovers. The South African rand was the winner for a remarkable fifth successive day: Investors are heartened by the erosion of the ANC's power in last week's regional elections.
RBNZ cut expected tonight
The smattering of low-key ecostats that appear today will probably have little impact on exchange rates. Only the Swedish and Norwegian inflation figures have any potential to do so. The main item on the agenda is the monetary policy announcement by the Reserve Bank of New Zealand at 22:00 tonight.
Following last week's rate cut by the Reserve Bank of Australia investors are almost certain that the RBNZ will follow suit, lowering the Official Cash Rate from 2.25% to 2%. The move ought not to weigh too heavily on the Kiwi dollar: a) because it is expected and b) because 2% is still highly attractive.
There are no important ecostats from Europe or North America.