Unbowed and unmoved


A messy start to the week brought several developments of interest to the market but nothing of any real market interest. Exchange rate ranges were typically narrow and just 0.8% separated the antipodean leaders from the yen and the krone at the back of the field.

Although the media almost all seemed to take a dim view of the prime minister's £1bn deal with the Democratic Unionist Party, investors saw it in the perspective of stronger and more stable government. Sterling was, on average, unchanged on the day and it was steady against the US dollar, the euro and the Swiss franc.

Ben Bernanke, the erstwhile chairman of the US Federal Reserve, and Mario Draghi, the incumbent European Central Bank president, both had speaking engagements. Each drew attention to inequality, Mr Bernanke in the context of November's US election result and Sig. Draghi linking it to the need for continued monetary stimulus.

Unexpected consequences

Knee-jerk reactions to better-than-expected German business confidence data and weaker US durable goods orders took the euro higher and the dollar lower but there was no lasting effect. A order to sell 57 tons of gold, apparently placed in error, took £11 off its price.

Although the massive gold sale was quickly reversed there was no concomitant recovery in the price. An hour ahead of London's opening this morning it did begin to move higher but even then it was still $4 or so lower than its pre-fat-finger level. Nobody can explain why, other than to link it with the yen's weakness and put it down to improved investor confidence. News that Brazil's President Michel Temer has been charged with corruption did no harm to the Brazilian real, which strengthened by 1.6% on the day. Nobody has come up with any convincing justification for that, either. 

Easier to explain is the outperformance of the Australian and NZ dollars. Both were helped by the ECB president's continued commitment to asset purchases and ultra-low interest rates.

Central bankers line up

Three central bank chiefs will be speaking today. Mario Draghi is up first, followed by the Bank of England's Mark Carney and the Fed's Janet Yellen. Supporting roles will be played by Reserve Bank of Australia deputy governor Guy Debelle and Fed presidents Patrick Harker and Neel Kashkari.

Mario Draghi will be making the opening remarks at the ECB Forum on Central Banking. It should be a more heavyweight address than yesterday's. Janet Yellen will be discussing economic issues at the Royal Academy, followed by a Q&A session. She is unlikely to make any dramatic revelations but you never know.

Mark Carney ought to be the most interesting of the trio when he presents the bank's Financial Stability Report at half past ten. Brexit is sure to come into the mix, as is the persistence of the 0.25% Bank Rate. If he does not volunteer the information, the journalists in his audience will certainly try to pry it out of him.