Sterling hangs in there

Two days running

Wow! Two winning days on the trot for sterling. It had to share the love with the euro, the swiss franc and the US dollar but that should not diminish the achievement of a currency that is more often to be found in the back half of the field. 

The pound's claim to fame came with the manufacturing sector purchasing managers' index. At 55.1 it was far from a world-beating number: the equivalent Euroland figure was a point and a half higher at 56.6. But investors had expected it to be unchanged at 54.3 so the improvement was a pleasant surprise. They allowed the pound to consolidate Monday' gains and together with the euro it is the top-performing major currency over the last seven days.

An absence of White House shocks also went down well with investors on Tuesday. They are hoping that the appointment of Marine General Kelly as chief of staff will bring some discipline to the competing factions within the administration. Washington-watchers are inclined to believe that he won't be able to do it but yesterday was a matter of so far, so good.

The euro came too

Tuesday's euro zone ecostats were not exactly stellar. They were, however, good enough to keep alive the idea that Euroland's economy is doing quite well, thank you. Gross domestic product expanded by a provisional 0.6% in the second quarter, similar to the growth in the US and double that of Britain.

Insofar as they fell short of forecast the €Z manufacturing PMIs were disappointing. All the figuress from Germany, Spain, Italy, France and pan-Euroland were lower on the month too (Greece was unchanged at 50.5). They were stronger than the equivalent US measure though, and that was what mattered. 

The dollar got away with it because the United States produces two PMIs; one generated by Markit, the same firm that constructs the European measures, and one from the Institute of Supply Management. The ISM figure has been around for considerably longer than the one from Markit so that is the one to which investors pay more attention. It also happened to be three points higher than its rival.


In the hiatus between yesterday's manufacturing PMIs and tomorrow's services sector PMIs today's agenda looks a bit desolate. The only ecostat that could affect sterling is the construction sector PMI, which analysts expect to be a couple of ticks lower on the month.

Data released overnight showed NZ unemployment falling from 4.9% to 4.8% in Q2. It would have been positive for the Kiwi had it not been for a -0.2% downturn in jobs as the participation rate fell from 70.6% to 70.0%. As it was, the NZ dollar was marked down by a cent, for a -1% loss on the day.

There are figures this morning for Swiss retail sales and Euroland producer prices. After lunch the ADP employment change figure will be a guide to Friday's US payrolls number.