Back to sleep

What we meant was…

To avoid being hostages to fortune, central bankers are often noncommittal in their comments. As the Fed's Alan Greenspan memorably put it: "If I seem unduly clear to you, you must have misunderstood what I said." Very occasionally, though, they wish they had been less ambiguous, like the Reserve Bank of New Zealand this morning. 

As widely expected, the RBNZ kept its Official Cash Rate unchanged at 1.75%. The front page of the Monetary Policy Statement looked much as investors had anticipated, ending with the observation that "Monetary policy will remain accommodative for a considerable period…". The statement also said "a lower New Zealand dollar is needed to increase… inflation and help deliver more balanced growth" but nobody paid much attention at the time.

So assistant governor John McDermott was dispatched to clarify the situation. He told the Bloomberg news agency that the currency "does need to adjust down". After Mr Mcdermott said a similar thing last October the Kiwi dropped back from an all-time high. This time it did not go far, and is almost unchanged on the day against sterling, the euro and the US dollar. However, the prod from the central bank did send it in their preferred direction.

August calm

For a good 24 hours or more, no national leaders have threatened a nuclear holocaust. That being the case, investors have tended to recline their chairs and stare out of the window at the rain. Wednesday was a proper August day, with little or no movement for most currencies.

Sterling is just about unchanged against all but the Canadian dollar and the South African rand. The rand saw further weakness on the back of Tuesday's parliamentary endorsement of president Zuma and the Loonie was half a cent lower despite a higher oil price and strongish data for Canadian housing starts and building permits.

The pound did not react to a softening of the RICS house price balance. It was close to equilibrium at 1% in July, down from 7% in June.

A bit more action

Today can hardly be quieter than Wednesday. If nothing else, there are two sets of UK economic data and a speech by a Federal Reserve rate-setter.  Friday could also be lively when the US inflation figures come out.

Investors blow hot and cold over the UK balance of trade data. They will sometimes react to a particularly bad figure but they are accustomed to seeing a deficit and tend not to get too excited about how big it is.

The manufacturing and industrial output numbers are a different matter. Because analysts seem to have a problem with making accurate forecasts, the data often appear as a surprise to the market. All too often that surprise is a figure that comes in weaker than expected. For that to happen today would be difficult indeed: industrial production is pencilled in for a meagre monthly increase of 0.1% with manufacturing flat on the month.