Not waving at the pound
Health and safety enforcers in Glasgow forbade Elizabeth Dickson, a school lollipop woman, to acknowledge drivers' co-operation by waving at them. To ensure compliance they employed a lollipop man to supervise her non-waving for a fortnight. Well, you can never be too careful. The same goes for selling the British pound.
A couple of months ago it became fashionable to offload sterling. Between mid-August and mid-October it fell by an average of -3.3%, gaining ground only against the South African rand. The euro took a particularly large bite out of the pound, strengthening by seven cents in the euphoria surrounding Greece's third successful bailout. Since then sterling has put in a decent recovery, rising an average of 2.7% and winning back five of those lost euro cents.
The pound was the second-best-performing major currency in October, losing out only to the NZ dollar, and it was the top performer over the last week. Compared with Friday morning it is higher (if only just so) against everything except the Norwegian krone and the Turkish lira. The lira put in a strong showing this morning, rising by 4% to a three-month high following a convincing general election win by the ruling AK party.
The Australian dollar gapped a cent lower when the Far East opened this morning, affected by a soft purchasing managers' index from China's manufacturing sector. The Aussie later recovered when another Chinese PMI came in stronger than expected, leaving it less than half a cent lower on the day.
Despite its advantage to the Australian dollar the "stronger-than-expected" Caixin manufacturing PMI was still in the contraction zone at 48.3 and it was lower than the 49.8 NBS reading that had hurt the Aussie earlier. There is certainly no sign yet that Chinese economic growth is pulling out of its recent dip.
The biggest loser over the weekend was the US dollar, which lost more than a cent to the pound. It spent the whole of Friday afternoon on the retreat, apparently because investors were disappointed by the American personal income and spending data and by a two-point fall, to 90.0, in the Michigan index of consumer sentiment.
PMIs it is then
Half a dozen PMIs were already out by the time London opened. Another dozen are yet to come today from Europe and North America. Tonight the Reserve Bank of Australia is expected to keep its benchmark interest rate steady at 2%.
The manufacturing PMIs from Japan and Sweden were higher on the month. Switzerland and Italy are also forecast to deliver improvements. That could reflect badly on sterling if, as expected, the UK measure fades to a two-year low.
Few analysts reckon the RBA will deliver a rate cut tonight. What it might do, though, is include in its statement a warning that it is leaning it that direction. Any such comment would be likely to weight on the Aussie and also, possibly, on the Kiwi.