Accidental win for sterling

Calm pound

Three weeks ago Nintendo's share price leapt, rising 121% in a fortnight as investors bought into the Pokémon Go phenomenon. Over the last week, as it became clear that Nintendo will earn little from the game, it has fallen by -55%. And they say sterling's volatile!

Well, they were saying that a couple of weeks back but even then the accusation was not convincing. While Nintendo was doing its Icarus impression the pound was strengthening by 2.4% and falling by -0.1%, for a net gain of 2.4% over the three weeks. And sterling was quietly confident again yesterday, adding 0.3% against the other dozen most actively-traded currencies with nary a loss in sight.

There were no economic data to affect it. The only UK statistic was a slight monthly fall, from 41.8k to 40.1k, in BBA mortgage approvals. It was almost exactly in line with forecast. A stronger-than-expected US consumer confidence reading was briefly positive for the dollar, as was a 3.5% monthly increase in US new home sales, but they had no lasting effect on Cable. The pound was just about unchanged on the day against the US, Canadian and NZ dollars, the euro and the Norwegian krone.

Lively yen

On Tuesday morning the yen moved higher in response to a suspicion that the forthcoming stimulative efforts of the Bank of Japan and Abe San's government would be muted. This morning the yen weakened when it began to look as though something big was at hand. 

Prime Minister Abe gave advance notice this morning of a ¥27tr (£200bn) stimulus package, the size of which exceeds the ¥20tr previously anticipated. It will be too large to deliver in one fell swoop but analysts suspect the announcement was intended to encourage the Bank of Japan to get a move on with its own monetary stimulus. Around the time of the announcement the yen vacillated across a two-yen range and was left with a daily loss of one and a quarter yen.

The Australian dollar was sucked into that volatility. Despite higher-than-expected inflation data this morning it is down by four fifths of a cent on the day.

History lesson

This morning the Office for National Statistics will reveal its first stab at UK gross domestic product in the second quarter of 2016. The consensus among analysts is that GDP will have expanded by 0.5% in Q2, a little more than the 0.4% growth seen in Q1.

The figures will fail to take into account the effect of the EU referendum, which took place just a week before the end of the quarter. Given the fairly broad assumption that the Brexit decision will dampen the economy during the rest of the year (though nobody has any clear idea of by how much), the Q2 figure is, to an extent, irrelevant. That is not to say it could not affect sterling.

The Federal Reserve policy statement comes out this evening. No change is expected.