Sterling in the dock again

The Panama Defence

The flood of accusations about tax-haven abuse in Central America have given rise to The Panama Defence: "I have done nothing wrong". It is not always effective - Iceland's prime minister is out of a job. And sterling might have done nothing wrong yesterday but it still took a flogging.

Critics will point to the UK services sector purchasing managers' index for March, which came in at 53.7 and failed to match the forecast 53.9. It is a fair argument but the number did represent a useful one-point monthly rebound and it was stronger than the equivalent readings from pan-Euroland and the United States. Also, there was no reaction at the time from sterling: it was only after lunch that the wheels came off. In other words, the fact that sterling did nothing wrong was not enough to protect it in the court of public opinion.

The reverse was true of the Japanese yen. The Bank of Japan governor said he was "monitoring the currency", BoJ-speak for "wanting to see it lower". Instead of bending to his wish, the yen touched a 17-month high against the US dollar and was the day's top performer among the major currencies. The move increased the possibility that the BoJ could announce extra monetary stimulus at its policy meeting on 28 April, even that the central bank could intervene to sell its currency, but the yen is on a roll and investors are still happy to go with it.

Milk nourishes Kiwi

The Swiss franc's safe-haven status took it to joint second position on Tuesday, with a one-cent gain over the pound. Its unlikely partner in slot number two was the NZ dollar, which picked up one and three quarter cents. The Kiwi's saviour was a 2.1% rebound in the fortnightly global dairy trade index of milk prices.

The NZ dollar's sensitivity to the GDT index varies. It does not always react but it did so yesterday, adding nearly two cents after the figure was published. Otherwise, Tuesday's ecostats did not have too much of an impact on exchange rates. The services sector PMIs from Euroland were vaguely disappointing; only the 55.3 from Spain beat forecast and even Germany's 5.1 failed to match expectations. The two US readings were better than expected but were only of brief help to the dollar.

Stronger-than-expected Euroland retail sales did not matter. Nor did wider trade deficits from Canada and the States.

FOMC minutes

Half of today's economic statistics were already out by the time London opened and none of them is of massive significance. The real highlight will be at 19:00 when the FOMC minutes are published.

The Federal Open Market Committee minutes may - but probably won't - shed more light on the outlook for US interest rates. Their importance has been superseded by the Fed chairperson's comments last week.

All that remains is Canada's Ivey purchasing managers' index this afternoon. A 55.0 is indicated.