No real direction

Rand and Aussie to the fore

As suspected yesterday morning, there was not a lot on the agenda to capture investors' imaginations. The result was mostly narrow ranges for exchange rates. Just 1.3% separated leading pair the from the laggard.

That laggard was the Norwegian krone. The OECD, a group of mostly rich countries, said last month that the krone was overvalued by nearly 30% against the euro. The calculation was based on purchasing power parity (PPP), which compares the cost of equivalent baskets of goods in different countries. In the last fortnight the krone has lost a little over two percentage points of that overvaluation and Monday's decline contributed to the correction.

At the head of the field the South African rand and the Australian dollar shared a 0.9% lead over sterling. The rand enjoyed no special advantage: it was one of several emerging market currencies to move ahead. The Aussie received some late help from the Reserve Bank of Australia's statement explaining why it had kept its benchmark interest rate unchanged at 1.5% this morning. There was an upbeat tone to the statement, dispelling any thoughts of a rate cut.

Pound to the rear

In the great scheme of things the half-cent or less that separated sterling from the US, Canadian and NZ dollars, the euro, the franc, the yen and the Swedish krona was hardly a gaping chasm. However, for the krona and the pound, which were on the wrong side of the gap, it was at least an embarrassment.

Early in the London day somebody took the euro for a walk, sending it half a cent higher against the US dollar and the pound for no obvious reason. Within an hour and a half a reversal of the move had begun and by lunchtime the correction was complete.

On the day sterling lost half a US cent, a quarter of a euro cent and a dozen Swiss ticks. It was down by an average of -0.3% - half a yen - against the other dozen most actively-traded currencies.

A smattering of data

Today's agenda, whilst hardly action-packed, will at least be more interesting than yesterday's almost-blank canvas. A strong Australian construction sector purchasing managers' index and a weak UK retail sales figure opened the proceedings.

Australia's construction PMI came in more than five points higher at 53.1 while the British Retail Consortium reported a -0.4% fall in like-for-like sales in February compared with the same month last year. A -7.4% monthly fall in German factory orders did no harm whatsoever to the euro ahead of London's opening.

This morning the EC presents revised data for fourth quarter gross domestic product, which are expected to leave growth unchanged at 0.4%. After lunch Canada and the States reveal their balance of trade figures for January and the Ivey School of Business prints its Canadian PMI. New Zealand's GDT milk price index is also due out today. China's trade figures come out tonight.