The Organisation for Economic Co-operation and Development is sceptical that the continuously rising GCSE and A-level grades achieved by British students reflect a genuine improvement in educational standards. That everybody gets an A* does not prove universal excellence, it means everybody is average. The OECD concludes that pupils’ actual performance remains “static” and “uneven” and it questions the logic of an examination system that awards a C grade to candidates who spell their name correctly at the top of the answer paper.
In a separate assessment of Britain’s situation the OECD welcomes the deficit-reduction efforts of chancellor George Osborne, saying they have “significantly reduced fiscal risks, contributing to lower bond yield spreads and diminished uncertainty”. It believes the current programme “strikes the right balance between addressing fiscal sustainability… and preserving short-term growth” and urges the government to “continue its difficult fiscal consolidation and structural reform programmes to return the economy to a sustainable path”. However, the OECD also sees a downside. Where previously it was forecasting gross domestic product (GDP) to grow by 1.7% in calendar 2011 it now looks for just 1.5% growth. That is appreciably less than the 2.1% predicted by the Office for Budgetary Responsibility.
Like the OECD commentary, yesterday’s UK employment data were a mixed blessing for sterling. The number of people with jobs went up, the number of people without jobs went up and the number of jobseekers went down. Investors did not know quite what to make of the figures. They bought the pound, then they sold it, then they bought it again such that an hour after the announcement sterling was back to where it had started. The overall effect was to allow the pound another successful performance against the commodity dollars and the rand and to keep it steady against the US dollar. Against the euro, however, it appears to be fighting a losing battle. It has moved below the roughly five-cent range that had contained it since early November and has its eye on the October lows. It might even have ambitions on the early March low; if so, we will be waving bye-bye to another five and a half euro cents.
Perhaps what sterling needs is a decent nuclear meltdown. The one in Japan has done wonders for the yen, which hit a record high against the US dollar last night. It is still not clear whether the buying is being done by insurers and other Japanese investors repatriating money or by speculators who anticipate them doing so. Either way, the demand for the yen is undeniable. The 1995 dollar/yen low was an obvious target, so nearby that to achieve it was a done deal as soon as the idea took root. Once broken, the dollar fell another three yen in no time flat before the bargain-hunters stepped in. A by-product of the break was to send the commodity currencies spiking lower and the Swiss franc higher.
The jury is still out on the matter of intervention by the Bank of Japan. At the instigation of France’s Christine Lagarde G7 finance ministers will hold a teleconference tonight to discuss the financial fallout from Japan’s difficulties. There is every chance that they will express a joint desire for currency stability but there is a big question mark over what they might be prepared to do about it. Twice in the 1980s G5 and G6 (as they were then) co-ordinated their efforts to “stabilise” exchange rates first by weakening* then strengthening** the US dollar. The first one worked, because the turning point had already been passed. The second one didn’t, because it hadn’t. The prospect of success for co-ordinated intervention today is no greater than it was in 1987 but that does not mean they might not have a go at it.
Switzerland kicked off this morning’s proceedings with a 6.1% increase for industrial production in 2010 and an unchanged 0.25% policy interest rate from the Swiss National Bank. The only other European data are for Euroland construction output. North America provides the lion’s share of today’s ecostats. Canada’s contributions are wholesale sales and international investment flows. The United States is there with consumer prices, weekly jobless claims, capacity utilisation, industrial production, leading indicators and the Philadelphia Fed’s manufacturing survey.
The possibility of G7 coming up with an effective currency agreement tonight is not great but cannot be ignored. That possibility will probably keep the yen in check through today’s session and could also act as a general stabiliser for currencies in general.