Almost every UK statistic disappoints
Better-than-expected Australian GDP figure provokes relief rally.

A two-and-a-half-cent range separated Tuesday's sterling peak from Wednesday's trough and Friday's low. Although sterling was on the defensive, investors seemed reluctant to pull the trigger. The pound opened in London this morning a little more than a cent and a half lower on the shortened week.

With one exception the week's UK economic statistics were lower on the month, lower than forecast, or both. Mercifully, it was a short list. Mortgage approvals in April numbered 45.2k, the lowest number for that month since records began in 1993. Purchasing managers' indices for the manufacturing and services sectors were down on the month, down on forecast, at 52.1 and 53.8, respectively. The sole glimmer of light came from May's construction sector PMI. At 54.0 it beat the 53.3 recorded in April and just managed to pip the 53.8 predicted by analysts.

And that was it really. Sterling did not have much to say for itself and investors were unimpressed with the few things they did get to hear. One research firm, Markit, summarised the week's figures as reducing the upward pressure on inflation and pointing to growth of no more than 0.3% in the second quarter of the year. On both counts they militated against any early interest rate increase from the Monetary Policy Committee.

The Aussie dollar had plenty to say. Though none of them looked amazingly good, the Australian data were seen as the temporary result of flooding at the end of last year. Among the weather-affected figures were the -2.0% fall in Q1 corporate profits, hard on the heels of a -2.8% fall in Q4 2010, and a widening of the current account deficit to -$10.4 billion. Building permit issuance fell by -1.3% in April and by -11.5% in the 12-month period. The figure reflects weakness in the sector as a whole, but probably understates activity because some authorities have waived the need for permits in order to allow people to rebuild their properties without being hampered by red tape.

Paradoxically, the Aussie's great leap forward came after figures showing the economy contracted by -1.2% in the first quarter, especially as the number was worse than the -1.0 % shrinkage that analysts had predicted. Investors had been geared up for a bad number; when they saw annual growth of 1.0%, despite the Q1 drop they bought the Aussie in a relief rally.

Until Tuesday the Australian dollar was looking good, held high by expectations that the Reserve Bank Of Australia was about to raise its benchmark cash rate from 4.75% to 5%. The thinking was that if the increase did not come with Tuesday's board meeting it would happen next month. The RBA shattered that belief with its statement from the governor. Not only did the cash rate stick at 4.75%, the wording of the statement indicated that an increase is not imminent. The Aussie dropped more than half a cent against the US Dollar and twice that much against the pound.

There are some middle-weight figures from the UK including the trade balance, producer prices and manufacturing and industrial production. Thursday's interest rate decision from the MPC will be significant only in the unlikely event that it delivers other than a "no change" verdict. Otherwise it will be the minutes of the meeting in a couple of weeks' time that are more important.

Sterling is off the bottom against the Aussie but is not exactly going up. Buyers of the Australian dollar should continue to hedge their risk, and consider fixing a price for up to half the money they need with a forward purchase.