Purchasing managers (and Greece)

Confidence
A bottle of Chateau Mouton Rothschild 1945 sold at auction last Thursday for £11,750, even though the greater-than-usual amount of air in the bottle suggests it might be undrinkable.  So somebody paid $18k for a wine they daren't open. Perhaps the same confident investor is also long of Greek bonds.

The strident battle of rhetoric between Athens and its creditors has taken Greek government bonds almost to the point of being a "binary" investment: They will either turn out to be worth something, if the bailout cash starts to flow again, or nothing if no agreement is reached and Greece defaults. At the end of last week the sensation was that there would be an agreement. At the beginning of this, investors were not so sure.

Even so, the confidence boost on Friday was enough to make the euro the joint top performer among the major currencies. It strengthened by half a cent against sterling and added a quarter of a US cent. The Norwegian krone shared the euro's lead, helped by an unexpected fall in unemployment from 3% to 2.7%.

Shrinkage
Canada and the United States both reported their economies had shrunk in the first quarter of the year. In the longer run the news made little difference to the two currencies, though there was some movement at the time.

The downward revision to US gross domestic product changed the original estimate of 0.2% (annualised) growth to a -0.7% contraction. That was not great but investors had been prepared to see an even worse number so they had no reason to punish the US dollar. 

The Canadian dollar was less fortunate: forecast growth of 0.3% (also annualised) was replaced with the actuality of a -0.6% shrinkage. The initial reaction took more than a cent and a half off the Loonie's value but a steady recovery left it just a fifth of a cent lower on the day.

PMI round one
The first of the month brings the initial set of purchasing managers' index readings from around the world. All but one of today's numbers relate to the manufacturing sector, the odd one out being this morning's 53.2 for the Chinese services sector.

Australia fired the opening shot with the Performance of Manufacturing Index coming in more than four points higher at 52.3. It was the first positive reading since August and the strongest since October 2013. The two Chinese manufacturing PMIs were just about unchanged at 50.2 and 49.2 while Sweden's was a point lower on the month at 54.8.

The two softest readings are forecast to be from Switzerland and France, both of which will probably remain stuck in the contraction zone below 50. Spain could once again deliver the strongest result, fractionally ahead one of the two US numbers. If the analysts are right there will be little difference between the readings from Britain and pan-Euroland. Tonight the Reserve Bank of Australia is expected to leave interest rates unchanged.