Yesterday was most notable for the lack of information. The Bank of England left the UK base interest rate on hold and made no change to the £200 billion of quantitative easing it has undertaken. The European Central Bank did very much the same thing. The only difference is that the BOE doesn’t hold a press conference unless it makes a change whilst the ECB has a ‘pressa’ as they are affectionately dubbed, whether they make a change or not.
However, the mere fact that the ECB didn’t show signs of panic in spite of the melee raging around the European area was enough to give the Euro a little boost and it made it back above $1.21 against the US Dollar. The euro was also helped by the comments from a Chinese pension company which decried the feeling that Chinese companies would reduce their Euro denominated reserves and the view from Portugal that it would not need to tap into ECB reserves will also have helped.
That enthusiasm didn’t translate into strength against the Pound though because Sterling is being bought in its own right. This is in spite of President Obama’s attacks on BP (is this some kind of mind game to put England off their stride when they meet the USA team tomorrow? I know it sounds odd but I am just posing the question. I’ll say no more) and in spite of the mixed economic data coming from the UK. Once again, investors and traders are buying into one of the least frightening currencies when the Euro in particular is still a bit of a pariah. The decline in European banking shares seems to indicate that investors see a Greek default as being an inevitable conclusion to the current situation. I am sure the ECB and the German government in particular, hope that is not the case because Germany is now committed to supplying financial support to Greek creditors.
In other news, Chinese reports that their inflation rate hit a 19 month high helped to weaken the Australian and New Zealand Dollars. That may seem an odd correlation but if China is forced to advance its measures to slow economic activity, it will have a negative effect on those countries which export to China and those countries would have less need to hike interest rates. That reduces demand for the Aussie and Kiwi Dollars which have been in great demand for the interest rate yields both countries offer.
Today’s data diary is one of the largest of the week; UK producer prices and US retail sales are the most influential of these and the Pound and US Dolalr should do well if the figures are in line with expectations but all of that may be largely overshadowed by the start of the World Cup. This is a football competition open to the whole world as opposed to the World Series which is a baseball competition open to American and a few Canadian teams. I didn’t want you to get confused. Anyway, come on England.
And finally, Associated Press are reporting on a not very bright crook who, when attending court in Vernon, Connecticut on charges of larceny, took the opportunity to break into a number of cars outside the court and steal, amongst other things, a satnav. However, crime doesn’t pay.....well not if you are stupid anyway.... because he was caught when he tried to sell it to a man in the courthouse who just happened to be the satnav’s rightful owner.