Mixed US data leaves USD flat

Today's Highlights

UK inflation data awaited but Scotland dominates traders' thoughts

Mixed US data leaves USD flat

FX Market Overview

Monday lacked data but there was enough hot air being blown across Hadrian's Wall to keep things lively. I saw a great picture this morning of an advert showing Alex Salmond on the side of a train. The words, 'Flying Scotsman' were emblazoned along the lower part of the train carriage in huge letters but, when the door opened, the' F' disappeared. PR is such a tricky thing isn't it.

Monday's US data was quite contradictory; a strong showing on the Empire State Manufacturing Index was counterbalanced by a fall in industrial production; largely due to weakness in the automobile market. The US Dollar remained pretty flat as a consequence. Tomorrow brings US inflation data and the interest rate decision from the Federal Reserve. The Dollar is likely to stay fairly static until then but any hint from the Fed that they are thinking of an early interest rate hike will strengthen it significantly.

We saw the minutes from the last Reserve Bank of Australia meeting overnight. They reiterated their view that we should expect a period of stability on interest rates but warned against the risk of rising house prices and that would suggest they are more inclined to hike rates than cut them. The Australian Dollar strengthened marginally but it has been flattered by a weakened Pound.

Today's data includes UK inflation figures and both input and output prices at the producer level (a leading indicator of inflation). Do you think anyone will pay these figures much attention with an n independence vote hanging over us? No, neither do I. The only caveat to that is if the headline number (CPI inflation) is below 1.5%, Sterling may slip again but I think the Pound is likely to trickle lower anyway as we near Thursday's vote. Wednesday's UK unemployment data will probably be taken apart to reflect the variation between the rest of the UK and Scotland or good or bad spin-doctor purposes.

We'll also see the German ZEW business expectations index. The forecasts are for another decline and that would be in keeping with recent Eurozone data. Could there really be any more bad news for the Eurozone? Yes there could.

Away from the markets and the Scottish debate we have proof that not all justice is good justice. A man has been convicted in Cameroon for being a homosexual. The evidence against him is that he displayed 'feminine mannerisms'. The evidence for the prosecution was that he liked to drink Bailey's Irish Cream; a drink considered to be feminine by the court. Sometimes words fail me.