Expect more surprises

Grepudiation
It is hard to know which allegorical tale will turn out to be more appropriate to the situation in Greece, Chicken Licken or the Boy Who Cried Wolf. In the former, a scaremonger is debunked; in the latter, a profusion of false alarms create an unjustified sense of security.

As expected (if anything can be said to be "expected" in this anarchic process), Greece failed to repay €1.6bn to the International Monetary Fund yesterday. The sky didn't fall down and there was not even a blip in the value of the euro. So far then, the Chicken Licken theory continues to hold good and investors cleave to the Micawberesque notion that something will turn up.

Although the euro cannot be said to have had a good day, losing half a cent to the US dollar and the British pound, it strengthened against the Swiss franc, the Canadian dollar and the Swedish krona. Compared with its position a month ago the euro is firmer against all but sterling and the krona.

Most data disregarded
The majority of Tuesday's ecostats attracted minimal attention from investors. An upward revision to first quarter UK gross domestic product and higher-than-expected business investment did little for sterling. A below-forecast provisional 0.2% inflation reading in Euroland did not harm to the euro.

The statistic that investors did pounce on was the one for Canadian GDP in April. Because Canada releases its GDP data piecemeal, on a month-by-month basis, the numbers do not usually have much impact. However, the unexpected -0.1% contraction in April marked the fourth month of zero or negative growth. The news cost the Loonie a cent and a half and it was down by that much on the day, making it the weakest among the major currencies.

On average the pound was unchanged against the other dozen most actively-traded currencies. It added two thirds of a Swiss cent, held steady against the yen and lost 20 cents - 1% - to the day's leader, the South African rand.

PMIs and Greece
The first working day of the month brings the usual round of manufacturing sector purchasing managers' indices. China's two measures, announced earlier, were either side of breakeven at 50.2 and 49.4. The UK reading is not likely to be among the front-runners. 

Of greater interest will be the Bank of England and the European Central Bank. At half past ten the BoE governor will introduce the bank's Financial Stability Report. Investors will be keen to hear what he might have to say about the interest rate outlook. Whilst today's gathering of the ECB governing council is billed as a "non-monetary policy meeting, there can be little doubt that Greece will be high on the agenda. It would be a surprise if the ECB were to make no announcement after the meeting.

Meanwhile, the horse trading between Athens, Brussels and Berlin will continue, even though the horses have escaped and nobody wants to trade. Expect more surprises.