Windfall gain for sterling

What was that?

At nine minutes past five sterling jumped a cent higher against the euro and made similar gains elsewhere. There were no data, opinion polls or other news to justify the move. The guess is that it was the result of a "fat finger" trade, wherein a dealer intending to buy a million pressed the squillion button instead. Whatever the cause, and although there was an almost immediate correction, some of sterling's windfall gains stuck. Added to gentle rallies that had taken place earlier the pound was able to take fourth place on the day.

The pound's average gain was 0.4%. It picked up one euro cent, two and a half yen and one and a quarter US cents. For a second day the South African rand led the way after Standard & Poor's confirmed its BBB- rating for the country: a downgrade had been feared.

June's off

The Federal Reserve chairperson's speech yesterday evening went very much as expected. Janet Yellen conceded that last week's soft payrolls data were "disappointing" and failed to reiterate her expectation of higher interest rates "in the coming months". So there will be no increase this month. 

Ms Yellen's caution came as no surprise and had little effect on the US dollar. It was vaguely positive for risk-appetite and since her appearance equity prices have tended to move higher, as have many of the commodity-oriented currencies. For the same reason, the safe-haven yen was Monday's laggard, falling by -1.5% against sterling.

Another interest rate that will not be going anywhere in June is the Reserve Bank of Australia's Cash Rate, which was kept at 1.75% this morning. Because some investors had been suspicious of a cut the no-change decision, and the absence of any hint in that direction in the RBA's statement, the Aussie strengthened after the announcement, securing a quarter-cent gain on the day.

Euroland growth

In another meagre crop of economic statistics the highlight today will be the revised figures for €Z gross domestic product in the first quarter. For a second day there is almost nothing from the United States.

German industrial production, already published, rose by 0.8% in April and offset the disappointment attached to yesterday's fall in factory orders. This morning also brings France's balance of trade and production data from Spain and Norway. Euroland GDP is expected to emerge from its revision with Q1 growth unaltered at 0.5%. After lunch Canada's Ivey purchasing managers' index is forecast to be a point lower on the month at 52.0.

There are important data tonight for Japanese Q1 GDP and China's balance of trade in May. Australia reports on mortgage lending.