The build-up

Much twiddling of thumbs

With no useful economic data for them to chase it was an epic day for thumb-twiddling by investors on Monday. Exchange rate ranges were predominantly narrow and net daily movements were mostly small. 

With the exception of the South African rand, which has strengthened by 4% since Thursday and led the field for a third successive day, the outliers were the NZ and Canadian dollars. The Kiwi picked up two thirds of a cent against sterling and the Loonie was down by half a cent. Sterling was steady against the US dollar and the euro and almost unchanged, on average, against the other dozen most actively-traded currencies.

The US NAHB housing index, Monday's only even vaguely important ecostat, came in stronger than expected at 65, beating forecasts by five points. It had a positive effect on the dollar; if house-builders are at their most confident in nearly a year they cannot be too fretful at the prospect of higher interest rates.

A new hand on the RBA tiller

Orderly career planning at the Reserve Bank of Australia tends to promote the deputy governor when the governor leaves. So it has been this time, with Philip Lowe stepping into Glenn Stevens's shoes. This morning's RBA board minutes will be the last signed by Mr Stevens.

The tone of the minutes was upbeat and there was no hint of an inclination towards lower interest rates. "Taking into account the recent data, and having eased monetary policy at its May and August meetings, the Board judged that the current stance of monetary policy was consistent with sustainable growth in the Australian economy and achieving the inflation target over time." 

As the minutes were published the Australian Bureau of Statistics reported that house prices had risen by 4.1% in the year to June. It was the slowest pace of increase in three years. The house price figure balanced out the RBA minutes, in that slower growth reduces upward pressure on rates. The Aussie was unchanged on the combined events and it was a quarter of a cent firmer on the day.

The big build-up

There are more ecostats on today's agenda than on yesterday's but not a whole lot more. None can be described as critical so investors will spend the day placing their bets on what the Bank of Japan and the Federal Reserve might do tomorrow.

With Switzerland's trade figures (a SFr3bn surplus) and German producer prices (down by -1.6% on the year) already out of the way there are no more European data to come. US housing starts and building permits come out after lunch as does New Zealand's GDT index of milk prices.

Early tomorrow the Bank of Japan will reveal whether or not it is stepping up its asset-buying activity. There is little or no consensus as to what it will decide. That means there will be surprise on the part of some investors whatever the outcome. Expect yen movement.