Stories and surprises


The euro and the Japanese yen both reacted to unsubstantiated stories about their respective central banks. In the euro's case it meant a half-cent loss. With the yen it was a half-yen gain. Both stories are credible but the reaction of investors looked a tad overdone.

A story put out by Bloomberg, a financial news agency, had it that the European Central Bank would announce a lower inflation forecast at the end of the Governing Council meeting today. If so, president Mario Draghi would be unlikely to deliver the half-expected hawkish tilt at his press conference and the end of the bank's asset purchase programme would be pushed further over the horizon. The euro lost a net three fifths of a cent to sterling and a dozen ticks to the US dollar.

This morning the yen popped higher after a story that the Bank of Japan is modelling an end to its monetary stimulus scheme and preparing to change its language on quantitative easing. Given the glacial pace of strategy change at the BoJ it would be optimistic to expect a change if tack anytime soon.


After suffering a pre-election knock-down on Tuesday the pound got back onto its feet yesterday, sharing the lead with the NZ dollar. As it did so the Canadian dollar fell to the canvas after oil prices reacted to a relatively obscure US statistic.

As the opinion polls continued to point to a comfortable - if not a landslide - victory for the Conservatives at today's election investors became less uneasy about the pound. It strengthened by an average of 0.5% against the other dozen most actively-traded currencies, adding half a US cent. Compared with its position prior to the announcement of the unscheduled vote it is up by an average of 1.2%.

The Energy Information Administration's weekly barometer of US oil stockpiles showed an increase of 3.3m bbl, almost exactly the opposite of what investors had expected. It knocked -3.5% off oil prices and that, in turn sent the Canadian dollar -0.8% lower on the day.


A smaller-than expected Australian trade surplus caused a setback for the Aussie this morning which was reversed shortly afterwards by news of a 14.8% monthly increase in Chinese imports. The highest-profile ecostat today will be the revision to Euroland growth in the first quarter.

This morning also brings data for Swiss inflation, pencilled in at 0.3%, and Greek unemployment, which was last seen at 23.2% and is expected to stay uncomfortably high. After lunch the European Central Bank president will hold his regular press conference, at which he will explain why monetary policy remains extremely relaxed and why it is not about to be tightened. Rumour has it that Sig. Draghi will, as well as downgrading the bank's inflation forecast, upgrade its assessment of the Euroland economy. At teatime the Bank of Canada governor will be making a speech.

Oh yes, and there's a general election.