Two, possibly three

Don’t forget to look up

Every year thousands of graduating students hire mortar boards so that they can throw them in the air for newspaper photographers. Now the University of East Anglia is banning the practice as an "unacceptable risk". Apparently students are forgetting to look up. So are investors, according to the Fed.

John Williams and Dennis Lockhart shared a podium yesterday. The two are presidents, respectively, of the San Francisco and the Atlanta Federal Reserve. Whilst neither is currently a voting member of the Federal Open Market Committee, their opinions are likely to be broadly in step with the mood of the committee. Mr Lockhart said there could be "two, possibly three" interest rate increases this year and Mr Williams agreed with him. Both concurred that next month's FOMC meeting is "live", which is Fedspeak for saying it could result in an increase.

Whether or not the next hike will come that soon, the Fed is clearly trying to manage upwards the rate expectations of sceptical investors, and it had a degree of success yesterday. American share prices turned south and most equity indices in the Far East followed suit this morning. The US dollar became the top-performing major currency, strengthening by half a cent against sterling and by a third of a cent against the euro.

Sterling unmoved

On average, the pound was just about unchanged on the day. It was a touch lower against the US dollar and the yen, a touch firmer against the franc and the Canadian dollar and steady against the euro and the Kiwi. Australia's dollar brought up the rear, falling by a cent and a quarter.

There was little sense of urgency about the moves: the Greenback and the Aussie were separated by just 1%. Consumer price index data from the UK and the US were not as compelling as they at first appeared and they had only modest impact on exchange rates. UK inflation slowed to 1.3% as cheaper air fares contributed to a -0.3% monthly fall in prices. US headline inflation accelerated to 1.1% but the core rate was down by a tick at 2.1%.

Japan reported overnight that its economy expanded by 0.4% in the first quarter. NZ "factory" gate prices were down by -0.2% over the same period and Australian wages rose by 0.4%.

Jobs, inflation and minutes

There are three items on today's agenda: the UK employment data, the Euroland inflation numbers and the minutes of April's FOMC meeting. Of these, the least important should be €Z inflation. The other two both have potential to move prices.

The Remain and Leave factions will each try to find something helpful to their cause among the UK jobs numbers. That debate will be more important than the data themselves. For what it's worth, unemployment is expected to be steady at 5.1%.

With the FOMC minutes investors will be looking for confirmation or contradiction of yesterday's comments by Mr Williams and Mr Lockhart.