Watch out for icebergs

Diaboli ex machina?

A pattern is developing here. For three days on the trot sterling has lurched a swift half-cent shortly after 6 o'clock in the morning. Monday it went up, Tuesday it went down and this morning it went up again. It looks very much as though somebody is mucking about.

There were no economic data or breaking news to justify the pound's evolutions and no follow-through to indicate any groundswell of investor sentiment. Tuesday's plunge, which at one point saw sterling two US cents lower, was followed by nearly 24 hours of recovery before sterling jumped higher again at five past six, almost precisely the same time as Monday's move.

Whilst it is impossible to know what is driving the pound's early-morning calisthenics, a couple of possibilities present themselves. It could be a person that is taking advantage of the thin pre-London market to take sterling for a walk and make a fast buck. Or it could be a computer algorithm that has been told to do the same thing.

Back in the real world

Sterling's breakfast-time peregrinations aside, currencies did not see a whole lot of action yesterday. Even the pound was practically unchanged, on average, against the other dozen most actively-traded currencies. The leading Kiwi and the lagging krone were separated by just 0.6%.

Investors struggled to find inspiration among the economic data. At 1.8% Swedish inflation was close enough to forecast to leave the krona virtually unchanged against the pound, the Canadian dollar, the Swiss franc and the euro. German investor sentiment came in higher on the month but below forecast, as did Euroland industrial production. US producer (factory gate) prices were up by an annual 2.2% or by 1.5% excluding the effect of food and energy costs.

The resignation of Bank of England deputy governor Charlotte Hogg passed by almost unnoticed by sterling. Investors also seemed unworried by the increasingly strident argument about another independence referendum for Scotland. 


Today's agenda should be educational, even if it does not in the end bring any great surprises. There will be philosophy from Janet Yellen at the Fed, politics from the Dutch general election and economics from the UK employment data.

In Holland the scale of support for Geert Wilders's anti-EU Partij voor de Vrijheid will be seen by many investors as a harbinger of things to come in France. A good result for the PVV could be a bad one for the euro. In Britain employment is forecast to be unchanged at 4.8% with a modest -5k fall in jobseeker numbers. Earnings growth will be crucial for sterling: with inflation on the way higher, investors will not want to see wage increases coming down to meet it.

As far as investors are concerned the Federal Open Market Committee will raise its target for the Funds rate by a quarter of a percentage point this evening. But how many more increases will there be in the pipeline this year?