ECB hints at fear of deflation

Today's Highlights

Sterling holds up after robust data

ECB hints at fear of deflation

RBNZ raise base rate again

FX Market Overview

I saw a headline on the Daily Mail website this morning which made me actually laugh out loud at its banality. Every parent out there will be shocked and appalled to know that the Duchess of Cambridge wiped some dribble off Prince George's face 'with her bare hand'. HER BARE HAND! Who would have thought it? These posh kids get such up-market treatment don't they!

Away from such shock and horror, the Pound had a less than sparkling day in spite of the Bank of England upgrading their growth forecast for the 2nd time in as many months, public sector borrowing being in line with forecasts and even after the CBI reported manufacturers at their most optimistic in 40 years. The CBI publishes its retail sector report today but I doubt that will be enough to significantly move the market.

There was a very interesting near miss from the president of the European Central Bank in an IMF press conference yesterday. Mario Draghi started to refer to deflation but stopped himself and changed his phrase to 'Low inflation'. The fact that so many around the markets are concerned about deflation (negative retail price movement) meant the moment didn't go unnoticed and the Freudian slip was duly registered. The Euro remains at the weaker end of its trading range against the Pound and unable to break higher against the embattled US Dollar. We get the German IFO busin3ss sentiment survey today and that is always closely monitored.

The big news overnight was the widely predicted 25 basis point rise in the New Zealand base rate. That's the second hike in a row from the Reserve Bank of New Zealand and the statement they issued strongly suggests there is more to come. The New Zealand Dollar strengthened by a cent against the Pound initially but has given back most of those gains in early European trade.

There is a lot of supposition and rumour about the US Federal Reserve cutting another $10 billion from its monthly bond buying program when they meet next week. We will have to wait to find out whether this is guesswork or informed rumour-mongering but the US Dollar remains at a low ebb.

As an aside, Credit ratings agency S&P has warned that an independent Scotland would face turmoil in its banking sector. They calculate that Scotland's banks would manage assets worth more than 10 times the total GDP of the country and that is a concern. They cite Iceland's banks which controlled 8.8 times GDP when they hit a financial crisis in 2008.

Away from the markets, I am no fan of all the pointless celebrities out there but there is a whole industry established around bringing us the latest clothing, shoe, relationship and other dross on a belt-fed basis. It has driven one man to feel ill. In fact, he believes he is allergic to Kim Kardashian. Mike Amess from Exeter says, "Just hearing the sound of the Kardashians' nasal voices or catching a glimpse of them on screen makes me feel nauseous and shaky." I think I may have the same complaint. Perhaps it is because we are inadvertently overdosing on Kardashian. Does that make the Daily Mail a 'dealer' or a 'pusher' and if so, could we sue?

Quote

“Too many people are buying things they can't afford, with money that they don't have... to impress people that they don't like!"
Will Smith