An unexpected win

Lucky break

There was a pleasant surprise for sterling's supporters when the UK manufacturing sector's purchasing managers' index came out on Tuesday morning. It contributed to another positive day for the pound, even if sterling had to settle for fifth place among the majors.

In the wake of last week's disappointing data for retail sales and first quarter economic growth investors would not have been particularly shocked if the manufacturing PMI had failed to reach the low bar set for it by analysts at 54.0. Judging by the way sterling moved lower ahead of the figure's release they were preparing for just this eventuality. So when it came in at 57.3 the pessimists had to make a quick reassessment and the pound added more than half a cent in the following half-hour.

Unfortunately, the early selling had cost it almost that much. So even though the pound continued to drift higher through the rest of the day its net gains were not exactly stunning, averaging 0.1%. It was up by that much - a fifth of a cent - against the US dollar and was unchanged against the euro. 

Kiwis at work

The commodity-oriented currencies tended to be the poorest performers on the day, held back by lower prices for their exports. The Canadian dollar fared worst of all while the Kiwi bucked the trend by strengthening slightly. 

The NZ dollar's get-out-of-jail card was the employment data for the first quarter. The number of people in work went up by 1.2% between December and March, more than keeping pace with the demographics and taking the rate of unemployment down from 5.2% to 4.9%. The data allowed the Kiwi to share first position for the day with the Swiss franc and the Swedish krona. It strengthened by a third of a US cent and went up by two thirds of a cent against sterling.

Manufacturing PMI figures from Europe were there or thereabouts although, contrary to expectations, only Sweden, Switzerland and Germany beat the UK figure. Euroland unemployment was steady at 9.5%.

Decision day for the Fed

A fairly brief ecostat agenda will provide little to energise investors during the London session. The only real prospect of stimulus is to be found in the US services sector PMIs and, conceivably, the ADP employment change figure, both of which appear after lunch. No change is expected from the Fed.

In theory the provisional Euroland gross domestic product data are the most important on the list but most of the components are already known. Growth of 0.5% is expected for the first quarter. Britain's construction sector PMI is forecast to come in at 52.0, a couple of ticks lower on the month. Analysts have modest expectations for America's ADP employment change figure, where an increase of 180k is pencilled in. 

It would be a surprise if the US Federal Reserve were to make any change to policy today. The wording of the statement will be important though.