A little short of time today. I had an interesting time yesterday testing ideas about what might explain the movements of currency crosses. EUR/USD seems to move with the interest-rate differential and credit spreads in the US and Europe. However, a similar model for GBP/USD was hopeless; a better one combined the rate differential with breakeven inflation (a measure of economic prospects) in the US and UK. I wonder whether a model of the latter type might also work for EUR/USD.

Alphaville reports that Richard Koo has said that the US consumer is still deleveraging. Interesting — I had thought this had come to an end. It may be that Koo is looking at the quarterly changes while I was looking at YOY change, which I suspect would give a better feel for the big picture.

It is flash-PMI day, and the HSBC China PMI registered its highest value since Q1 2011. It is still around 50, indicating roughly trend expansion. In the Eurozone as a whole, PMI’s were below 50 but beat expectations and their readings last month; this was also true for Germany, although France disappointed. The Eurozone current-account surplus took its highest value on the chart, which I suppose can only be a good sign, although falling imports will be part of the explanation.