Poundland's on its feet
Since time immemorial (well, for more than forty years) the Qatar riyal has been pegged to the US dollar. It still is: the Qatar Central Bank fixes its value "at an average price of QR 3.64 per USD". However, the link has come under at least temporary pressure.
Yesterday morning Saudi Arabia and its allies, including Bahrain and the UAE, cut diplomatic ties with Qatar, banned its airlines from overflying the kingdom and closed its land border. The dispute erupted within a fortnight of the US president's meeting with the rulers of the two countries. Analysts are still trying to figure out the broader political and economic implications for the Arabian Gulf and the world: they see no upside for either.
The QCB ought to have no problem maintaining the stability of the riyal's dollar peg. It is a lightly-traded currency and plays no major role in international trade. Even so, there have been stories of reluctance by banks in Egypt and Sri Lanka to accept the currency. A side effect of the diplomatic rift has been lower oil prices, on the assumption that it will prejudice the OPEC deal to limit production. Because of that the Norwegian krone was Monday's laggard, falling by -0.8%.
Sterling did surprisingly well on Monday. Investors chose to ignore the opinion polls and a couple of less-than-sparkling UK ecostats, allowing the pound to share third place behind the South African rand and the Japanese yen. At its side were the antipodean dollars.
The purchasing managers' index for Britain's services sector came in a point below forecast and two points lower on the month at 53.8. It made not the slightest difference to the pound. Nor did the BRC's like-for-like sales figure at midnight, which put sales in May -0.4% lower than a year earlier. The pound strengthened by an average of 0.2% against the other dozen most actively-traded currencies, collecting half a cent each from the US dollar and the euro.
There were two overnight lurches for the Australian dollar. The first was downwards, after the current account deficit for the first quarter came in at $3.1bn instead of flat. The second one, upwards, was the result of the Reserve Bank of Australia's decision to leave its Cash Rate unchanged at 1.5%. They cancelled each other out.
With most of the purchasing managers' index readings out of the way today's ecostat agenda looks rather thin. It includes nothing from the UK and hardly anything from the States.
The data from Euroland cover retail sales and investor confidence. After lunch Canada releases the Ivey PMI. Tonight brings New Zealand manufacturing sales, Australia's construction PMI and first quarter Australian economic growth.
Not many numbers, then, but should be no shortage of sport on the political front. The Middle East and Britain will be of interest, especially if the US president gets involved in the spat between Saudi and Qatar.