Chris Redfern: Stagnant States

Supporters of the US dollar will be feeling justifiably aggrieved that their currency ended up at the bottom of the weekly league table.

Friday (2 May)'s employment report included not only 114,000 more people in work than investors had expected, but a fall in the unemployment rate from 6.7 per cent to 6.3 per cent.

Yet apart from a brief upward blip the dollar was unmoved by the news. Investors had already come to the conclusion that near-zero US interest rates were going to be around for a while. Data showing that the American economy was almost stagnant in the first quarter helped cement that belief.

The British economy grew by a provisional 0.8 per cent in Q1, not quite as much as the 0.9 per cent investors had been expecting, but enough to keep sterling in the middle of the field.

The euro and its limpet-like companion, the Swiss franc, were there or thereabouts too. It will be another couple of weeks before Euroland publishes its figure for first quarter growth but the purchasing managers' index readings suggest it will be a positive number.

Investors were not sure what to make of last week's provisional 0.7 per cent Euroland inflation figure, which was lower than the expected 0.8 per cent but a step in the right direction from the previous month's 0.5 per cent. They will be paying close attention to the European Central Bank president when he holds his monthly press conference on Thursday.

For no particular reason the NZ dollar and the South African rand led the field. There were no economic data to justify their success: New Zealand's trade surplus and the ANZ index of business confidence fell short of expectations and unemployment in South Africa went up from 24.1 per cent to 25.2 per cent.

It was easier to see why the Aussie dollar had to share the wooden spoon with the US dollar: the Australian purchasing managers' index readings showed sharper slowdowns in both the manufacturing and services sectors.