UK 0.4% - 0.2% US

When central banks do nothing

Martin Donnelly, permanent secretary of the Department for Business, Innovation and Skills appeared before parliament's Public Accounts Committee yesterday. With no more pressing matters on their minds the committee amused themselves by forcing Mr Donnelly to say "Boaty McBoatface". Equally entertaining was the way central banks did nothing this morning.

Well, it was entertaining to those holding long positions in NZ dollars and Japanese yen; less so for anyone short of the two currencies. The Kiwi strengthened by 1% against sterling and the yen is 2.2% higher on the day. In both cases the rise was almost instantaneous and the common thread was central bank inaction.

The Reserve Bank of New Zealand was the first not to do anything, as it kept its Official Cash Rate unchanged at 2.25% for a second month. Although that is what most analysts had predicted, and despite the RBNZ statement noting that "further policy easing may be required", the Kiwi enjoyed a three-cent relief rally. A few hours later the Bank of Japan did not announce increased monetary stimulus. Its failure to act was positive for the currency, which jumped four yen.

No surprises

The two items on yesterday's agenda of most importance to investors were the preliminary UK gross domestic product data for the first quarter and the US Federal Open Market Committee's monetary policy decision. In the event, neither had much effect on the currency concerned.

Britain's economy expanded by a provisional 0.4% in Q1, putting growth for the year to end-March at 2.1%. The annual figure was a tick better than the forecast 2.0% while the quarterly change was bang on. In Washington the FOMC kept its target for the Funds Rate steady at 0.25-0.5% and the wording of the statement implied that the committee has become more relaxed about global economic risks.

Sterling did weaken on the day by a third of a US cent but that was less a symptom of news or events than of a technical reaction to its gains over the previous four trading days. The pound lost three quarters of a euro cent and was down on average by the same proportion - -0.6% - against the other dozen most actively-traded currencies. Sterling was steady against the rand and narrowly avoided the wooden spoon by taking a dozen ticks from the Australian dollar.

US growth slower too

The preliminary GDP data from the States will look better than yesterday's UK number but only because the Department of Commerce presents them as an annualised figure. At the expected 0.7% that would equate to a quarterly 0.2%. There is little else of any consequence on the agenda.

The two UK ecostats are for house prices, which Nationwide reckons went up by 4.9% in the year to April, and consumer confidence, which comes out at midnight. Euroland reports on consumer and business confidence.

Apart from GDP, the only US figures are for weekly jobless claims.