Sterling did well on Tuesday out of just about nothing. There were no UK data, no policy hints from the Bank of England, no breakthroughs on Brexit and no chance of the government coming out of tomorrow's elections with anything other than a good kicking. Yet investors gave the pound the benefit of the doubt and it won the day.
Investors bought into the idea that Theresa May might be ready to accept Jeremy Corbyn's demand for a customs union as part of his price for supporting her withdrawal bill. They also decided that the Labour National Executive Committee's decision to keep a second referendum as an option was better than if it had rejected the possibility. Investors conveniently ignored the risk that collusion with Labour could alienate more Conservative MPs and that Mr Corbyn might not see any need for a referendum if a Con-Lab Brexit agreement were to be settled.
Anyway, the charts worked in sterling's favour. A data-driven euro rally pulled sterling in its wake through downtrend resistance at US$1.2990 and an upward break ensued. By mid-afternoon the pound had established itself in new ranges and it had emerged as the top-performing major currency. It is an average of 0.6% higher on the day.
Another Kiwi flop
It has been a binary few days for the NZ dollar. On Thursday and Friday it was in the lead while on Monday and overnight it languished at the back of the field. The Kiwi's failure this time was the fault of disappointing NZ employment figures, which cost it 0.4% in US dollar terms and 1.0% against the revived pound.
Investors were less impressed with a downward tick in NZ unemployment, to 4.2%, than they were concerned by a 0.2% fall in the number of people in work. They also took issue with slower-than-expected wage growth; 2.0% instead of the forecast 2.1%.
The data that most pleased investors came from Euroland. Italy's economy expanded by 0.2%, thereby avoiding a technical recession. Spain's economy grew by an above-forecast 0.7% in the same three months and the euro zone as a whole also beat expectations with 0.4% growth. Investors accustomed to statistical disappointment from Euroland suddenly took a shine to the euro, which strengthened by 0.3% against the US dollar.
With large chunks of Europe celebrating Labour Day there are no ecostats from that direction on today's agenda. That leaves Britain and North America to reveal the first few purchasing managers' index readings for the manufacturing sector. The main event will be the Federal Reserve chairman's press conference this evening.
UK data already out show Nationwide's house price index 0.4% higher in April, up by 0.9% from a year ago. This morning the Bank of England publishes the figures for mortgage approvals and consumer credit, together with money supply. The manufacturing PMIs from Britain, Canada and the States are pencilled in at 53.0, 51.5 and 55.0/52.4 respectively (there are two readings from the US).
At half past seven Jerome Powell will explain again how patient he is with monetary policy. No change is expected to the Federal Funds rate. Mr Powell will doubtless have to field questions about presidential interference, following Trump's call for a 1% rate cut.