Euro wins again

Ultimata
The US foreign minister fell off his bike in the French Alps on Sunday. He was taken by helicopter to a hospital in Switzerland and thence flown to Boston, where his broken leg was eventually fixed yesterday. And if that process seems unduly xenophobic and long-winded, consider Greece's bailout "negotiations".

That's if you can call them negotiations. It looks as though each side presented the other with a list of its final demands yesterday. The one from the EC/ECB/IMF troika (this is what you must do) crossed in the post with the one from Athens (shan't). Investors were not downhearted though. They bought the euro, presumably in anticipation that the troika would prevail and the euro would survive.

It may be that the higher 0.3% rate of inflation in Euroland helped improve sentiment towards the euro but there was no obvious reaction when it was announced yesterday morning. The euro was the day's top performer, strengthening by two and a quarter US cents (2%) and by a cent and a half (1%) against sterling. 

Aussie jumps again
A day after the Australian dollar reacted positively to the Reserve Bank of Australia's interest rate announcement it jumped higher again this morning when the first quarter gross domestic product figures came out. GDP expanded by 0.9% in Q1, its best performance in a year.

The stronger growth led investors to believe that Australia's economy is doing alright after all, despite the loss of income from the mining sector. It also reinforced their expectation that there will be no further easing of monetary policy by the RBA. The Aussie went up by a cent against sterling and is one US cent higher on the day.

Tuesday's other economic data brought little to the party. Strong figures for mortgage approvals and construction activity were only of vague help to the pound. An unexpected fall in American factory orders had no direct effect on the US dollar (though the Greenback was Tuesday's biggest loser as a result of the rush to buy euros).

ECB
The European Central Bank Governing Council holds its bimestrial policy discussion today. Investors will be keen to hear what the ECB president has to say at his post-meeting press conference.

In particular they will be listening for a hint that the bank might not after all run its quantitative easing programme all the way through to its scheduled conclusion in September next year. If he comes out with anything along that line the euro will go up.

Today also brings the second full round of purchasing managers' indices, this time for the services sector. Australia was first up with an almost-unchanged 49.6 and China followed with a half-point improvement to 53.5. Spain's was two points lower on the month but at 58.4 it is still unlikely to be beaten by any country other than Britain, where a reading of 59.2 is predicted. There are also data today for Euroland retail sales and Canadian trade.