Fed Fed Fed
It was another one of those days for sterling. Before lunch it went up by three quarters of a US cent and after lunch it fell all the way back. As near as makes no difference Cable was unchanged on the day. So what was all that about?
Ostensibly it was the UK consumer price index data that sent the pound north after the headline rate of inflation came in at 1.2%, higher than the forecast 1.1%. Strictly that is true, in that sterling did strengthen by a quarter of a cent after the figures before topping out. But it was already well on its way by half past nine, helped along by the chancellor. Philip Hammond was reported as saying he would favour a transition period when Britain leaves the EU. And anything that makes a quick and dirty Brexit looks less likely is seen, at the moment, as positive for the pound.
So for nearly two hours in the early afternoon sterling was sticking its head above the US$1.27 parapet but there were too many snipers and, shortly after three o'clock, one of them got lucky. In the next 15 minutes the pound fell back by more than half a cent and it retreated further over the evening. The damage was not done by any news or data but by boredom. Those who thought they could push sterling through $1.27 gave up when they discovered that they couldn't.
Lack of imagination
Investors were not at their most imaginative yesterday. Cable's up, one two three, down, one two three pattern was replicated against the euro, the Japanese yen, the Canadian dollar and a couple of others. The end result in those instances was a net loss for the pound.
Britain's inflation numbers were indeed positive for sterling but not positive enough to maintain buyers' enthusiasm after the pound failed to break through that technical resistance against the US dollar. Sterling's losses were not serious; they averaged -0.3% against the other dozen most actively-traded currencies and the biggest was of just under a cent to the NZ dollar.
Investors' lack of imagination extended to most currencies. With few serious economic data to inspire them they were more interested in debating what the Fed chairperson would say this evening.
The Federal Reserve will very probably raise US interest rates today for the first time in a year and only the second time in ten and a half. The move is so widely expected that the increase itself will be a non-event. Of far greater importance will be what is on the monetary policy cards for next year.
Ms Yellen will have to field questions not only about the likely future course of interest rates but also about how policy could be affected by the incoming US president. Investors will be hanging on her every word.
Sterling's potential obstacle is this morning's UK employment data. And there are some other ecostats too.