The Fed obsession

ECB shock

The European Central Bank rather put the wind up financial markets on Thursday when it failed to announce any expansion of its asset-purchase (quantitative easing) programme. Equity prices fell as investors asked themselves if it really might be true that central banks are running out of ammunition.

The Bank of Japan had sowed the seed of that doubt the previous day when it, too, came up with no new stimulus. Stock markets in the Far East, which had missed the ECB's non-announcement, opened lower on Friday and share prices continued to fall in Europe and North America, as did commodity prices and the value of commodity-exporters' currencies.

The FX market's reaction was quite complex. The South African rand and the antipodean dollars felt most of the pain: Compared with Thursday morning's levels the rand is down by -2.3% while the Aussie and Kiwi share the penultimate slot with losses of -1.3% each. However, the flight to quality headed towards the US dollar and the euro rather than the supposedly safe-haven yen and Swiss franc, which had to share third place with an unlikely bedfellow; the pound.

Last words from the Fed

With the US Federal Reserve's policy meeting scheduled for 20-21 September committee members must be silent during the preceding week, making no comment after today. They seem to be a bit of a rush to beat that deadline and investors get the impression it might be game-on for a rate hike this month.

On Friday Boston Fed president Eric Rosengren spoke of the risks of waiting too long, saying "a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy". Coming up today are speeches by the Atlanta Fed's Dennis Lockhart and Lael Brainard, a Fed governor.

It is Ms Brainard's appearance that most intrigues investors, not least because it has been shoehorned into the calendar at the last minute. Thus far she has been the most dove-like of doves. Were she merely to want to underline her oft-displayed dovish credentials there would be no need for the urgency. So, the logic goes, she must be about to change sides and talk up a September rate increase. Investors will find out this evening.

A handful of ecostats

There are no premier-league economic data on today's agenda and not even any from the championship. Japanese machinery orders this morning were considerably stronger than expected but had no impact on the value of the yen. The Portuguese inflation numbers will not add much to the fund of human knowledge.

The pace picks up tomorrow with the UK inflation figures and a speech by ECB president Mario Draghi. Wednesday brings the UK employment data for July/August. UK retail sales come out on Thursday and US inflation on Friday.

The main focus for sterling will be Thursday's monetary policy announcement by the Bank of England. No change is expected to the 0.25% Bank Rate but the minutes could be interesting.