Plenty of nothing

Rand reprieved

A lot of FX market participants must have spent Tuesday wondering why they had bothered to get out of bed. The only real currency mover was the South African rand, which enjoyed a correction of some of last week's losses.

The rand moved 1.4% higher against the pound, leaving it -10% below its level at the beginning of last week and -2% down on the year to date. Its value against sterling is almost exactly in line with its average over the last five years and 10% below its ten-year average. Some say that at this level it is a buy because all the damage has been done: the popular finance minister has gone, the investment-grade credit rating has been lost and president Zuma looks set to survive the impending confidence vote.

The question, though, is whether that really is all that could go wrong. Who knows what a newly-empowered president might do in the future?


Although the rand was the only game in town yesterday, most investors would have not become involved with it unless they already had an axe to grind. They would have been forced to sit quietly at their desks watching the major currencies flat-lining.

At the head of the field the euro was unchanged against the US dollar and the Swiss franc. A dozen ticks behind them the Yen and the Canadian dollar shared second place. Tying for fifth place, and a further dozen ticks to the rear, the pound was unchanged against the Australian and NZ dollars. A quarter of a euro cent covered all seven of them.

Almost needless to say, the day's economic statistics created no ripples. Britain's construction sector purchasing managers' index came in a couple of ticks below forecast at 52.2. It had no effect on sterling. Euro zone retail sales increased by 0.7% in February. Canada reported a $1bn trade deficit, rather than the expected $0.5bn surplus, because exports fell slightly in February.

Services and minutes

During today's London session the focus will be on the second big round of PMIs, this time mostly related to the services sector. At supper time it will be the FOMC minutes that attract investors' attention. Sterling's only scheduled risk is the UK services PMI.

Australia's AiG performance of services index set the ball rolling with an improvement of nearly three points to 51.7. Spain followed with a half-point increase to 57.4. Britain's forecast 53.5 would be weaker than any of the readings expected from Euroland. The only other ecostats today are for Swedish industrial production and manufacturing orders.

The minutes of the March Federal Open Market Committee meeting come out at seven this evening. They ought not to matter, given that half the participants at that meeting have been freely offering their opinions to the media since then. But still investors will follow the ancient ritual of trying to work out where interest rates are going, and when.