A warning slap
"The UK inflation rate has no impact on sterling because monetary policy decisions are more related to confidence and growth than to consumer prices." That had been the recent tone of the Bank of England and investors were inclined to fall in with it. Until yesterday.
Sterling took a -0.5% bath, falling against all but the NZ dollar and the Japanese yen. It was looking nervous even before London opened but it was not until the CPI and PPI data printed at half past nine that the real downward pressure emerged. When it did, the pound began to head gently south in a move that continued until teatime.
At 0.6% the headline rate of inflation was unchanged on the month where it had been expected to tick up to 0.7%. Of itself that was no great shock but the producer price index figures showed a widening gap between input and output prices. Manufacturers' costs rose by 7.6% in the year to August while factory gate prices were up by just 0.8%. It seemed that investors saw the data as giving the Bank of England more reason to keep interest rates lower for longer or even to deliver a further cut.
In the last week or so investors have begun to question the ongoing commitment of central banks - particularly those in Frankfurt and Tokyo - to their quantitative easing programmes. Were central-bank money-printing to be replaced by government spending the supply of free money would dwindle.
Normally such fears would result in a move out of emerging-market and commodity-related currencies and an increased demand for the safe havens, of which the yen is the traditional class leader. Now, however, the yen's place has been at least temporarily usurped by the US dollar and the euro. The yen has been left out if it and for the last four days in succession it has been all but unchanged against the pound.
It remains to be seen whether or not the world's central banks really are rethinking their policies on quantitative easing. More will become clear when the Bank of Japan makes its scheduled policy announcement next week. But if they are considering turning off or turning down the flow of free money it will mean a wholesale reassessment of the elevated asset prices that their largesse has supported.
Yesterday's treatment of sterling demonstrates that investors have not entirely forgiven the pound for June's referendum vote. That will mean even closer attention being paid to today's UK employment data.
All the numbers will be under the microscope, especially the pace of wage increases. The average earnings numbers for July will be the first to relate to the post-referendum period.
There will be little to distract from the UK employment figures until tonight when New Zealand reports on second quarter growth. At last count the NZ economy was expanding by an annual 2.8%: Today's number could be as high as 3.6%.