The Swedes smell of success

The Swedish krona was the surprise leader in the global currency stakes last week just seven or so days after it had taken a beating following an interest rate cut.

Initially its upward drift was a natural reaction to the earlier selling. The krona also received a boost from news that -0.2 per cent deflation in Sweden had turned into 0.2 per cent inflation.

Not far behind the krona, the New Zealand dollar continued to milk the upwardly-tilted NZ interest rate outlook for all it was worth.

The domestic economic data was not a great deal of help, but the purchasing managers' index did show increased business activity in the private sector.

An equity market retreat led investors to seek the safety of the Japanese yen. It took third position for the week. Half a cent behind the yen, the Australian dollar was held back by employment data which showed a swing from full-time to part-time working and an uptick in unemployment to 6 per cent.

Right at the back of the field the Canadian dollar took an even bigger hit from duff jobs numbers. Contrary to investors' expectations there was a net loss of jobs in June and unemployment went up to 7.1 per cent, its highest level this year. The news left the 'Loonie' a cent lower on the week.

Less than half a cent separated the pound, the US dollar and the euro. Sterling was fortunate to be able to stay with the opposition though. Investors were not at all impressed by unexpected falls in UK manufacturing and industrial production but the equivalent numbers from Germany, Franc and Italy were even worse.

The week ahead is a big one for sterling, with the UK inflation figures tomorrow (Tuesday 15 July) and the employment numbers the following day. Both sets of data are germane to the interest rate outlook. Watch out also for Thursday's Euroland inflation reading.