Marking time

Not so short

The pound had another good day on Wednesday. Once again its upward progress had nothing to do with any UK economic data or news. With the world up to its neck in short positions last week the surprise is not that some profit-taking is going on but that it is happening so smoothly.

After a hesitant start yesterday the pound pushed ahead during the first half of the London session, peaking eventually in mid-afternoon. It failed to secure outright victory, losing out narrowly to the NZ dollar, but made headway against every other major currency. Sterling's average gain on the day was 0.5% and along the way it picked up half a US cent and three quarters of a euro cent.

The big build-up

With no ecostats of any consequence to shape their thinking investors did what they often do under such circumstances: They waited for something, in this case tomorrow's appearance by Janet Yellen, the Federal Reserve chairperson. 

Investors paid scant attention to a slowdown in South African inflation from 6.3% to 6%. They brushed off an uptick in Norwegian unemployment from 4.7% to 4.8% and a slight fall in BBA mortgage approvals went unnoticed. A -3.2% decline in existing (as opposed to new) home sales in the States had no effect on the dollar.

The chances are that Ms Yellen will be noncommittal in tomorrow's speech. She has never in the past made predictions about the Federal Open Market Committee other than saying that the decision will be "data-driven". The chances are, then, that after her speech investors will settle back into their comfort zone, with the prospect of low rates for longer keeping equity prices buoyed up.

Durable goods

The Census Bureau's figure for durable goods orders measures the monthly change in the value of orders received by US manufacturers for goods intended to last for three years or more. It is unclear quite why analysts attempt to predict the figure: most of them get it wrong.

The consensus for today's numbers is that orders will have risen by 3.5% overall and by 0.5% if transportation items are ignored. Outcomes above or below those levels could be expected to send the dollar in a similar direction, though not perhaps by far. Filling out the rest of the bill are Swiss industrial production, Swedish unemployment, German business confidence, UK retail sales (the CBI version), US jobless claims and the provisional purchasing managers' index for the American services sector. Japanese inflation comes out tonight.

There are revised gross domestic product data tomorrow from France, Britain and the United States. German and US consumer confidence measures will also be released.