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Sterling starts well

On a day-to-day basis the pound has made a promising start to 2017. Compared with Friday morning's levels it is ahead against all but the Canadian dollar. In several ways the opening shots in the Far East today represented a reversal of last week's (in)action.

In the last week of December the South African rand topped the table three times and the Canadian dollar vied with sterling for custody of the wooden spoon. This morning it is the Loonie that leads the way with an advantage of two thirds of a cent over second-placed sterling while the rand languishes at the back of the bunch. The US dollar, which also had an uninspiring end to last year, is close behind the leading pair.

The lesson here is not that investors are setting the stage for sterling's glorious renaissance, rather that the motiveless wanderings of the intra-holiday period are being smoothed out. Only when financial markets get back into their full swing will there be any indication of how investors might be setting out their stall for 2017.

Global economy starts well

While much of the world was sleeping off its new year hangover the opening shots were fired in the monthly PMI battle. Purchasing managers' indices from China, Europe and Australia gave no cause for alarm and some of them even raised a smile.

The numbers from China were on average better than expected, if only because the Caixin manufacturing PMI was a full point ahead of forecast at 51.9, making up for the shortcomings of the other two Chinese measures. Sweden and Germany both put in stronger manufacturing numbers. The only disappointment, if it can be called that, was the 49.3 from Greece, which drew attention to the risks of fighting economic stagnation with fiscal austerity.

The Business in Britain paper published this morning by Lloyds bank showed a moderately upbeat attitude among UK companies. Confidence had improved from six months earlier and businesses were more optimistic about export sales. They were nevertheless cautious about hiring and capital spending prospects. Business confidence is highest among firms involved in manufacturing, hospitality and leisure.

More PMIs

There are manufacturing PMIs to come today from Switzerland, Britain, Canada and the States. The UK figure is projected to come in half a point lower on the month at 53.0. There are also unemployment and inflation data from Germany as well as the GDT index of New Zealand dairy prices.

It is worth reminding that the monthly PMI numbers are watched closely by investors because they are, to a large extent, forward-looking They are compiled from the results of surveys that ask companies about such things as output, new orders, stocks, inventories of finished goods, input and output prices, employment and expectations for activity. 

In contrast with figures such as gross domestic product, which measure what was going on a month ago or more, the PMIs aim to provide a steer on what comes next.