I will start with an apology. I apologise for droning on about Europe but I am sorry to say, there is little else to speak about in the current economic climate. Yesterday’s newswires were full of it; this is just a flavour of the total barrage. Spanish retail sales plunged by 9.8% last month; the worst drop on record and another one in a 22 month decline. Spanish government debt is getting ever more expensive to service, the European Central Bank says it wants nothing to do with Spain’s refinancing of Bankia or other debt stricken banks and after fierce criticism for inaction, the governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, is stepping down a month early. Had enough or pushed out? We are not sure. However, it is another step towards the abyss for the Spanish economy and yet another troubling development for Europe.
On a brighter note, Greeks who were offended by IMF chief Chritine Lagarde’s comments about them avoiding taxes will be interested to know that Lagarde pays no tax on her roughly £350,000 per annum income because she is an official in an international institution. That’s coded language for ‘Gravy train’.
By way of contrast with Europe, the Confederation of British Industry says the retail sector is holding up well and UK interest rates are expected to stay at record low levels for up to 5 more years. Obviously that decimates a lot of people’s savings return but it does keep the cost of servicing debt down for those who have some, and that is probably the majority. In the CBI’s distributive trends survey, the index shift from a minus 6 reading to plus 21 in May, the fastest advance in over a year. Sterling had a better day as a result and returned to the upper end of its trading ranges. This morning’s UK mortgage data will be the next hurdle; it seems that getting a mortgage still follows the old banking rule that you can have it if you don’t need it so it will be interesting to see if there is any life in the lending market or, as appears to be the case, banks and building societies are sitting on as much reserve cash as possible.
It’s not just European retail sales that are struggling; poor high street data from Australian has weakened the Australian Dollar a tad overnight. This is another in a series of poorer Aussie data releases and Australia is also being hit by a slowdown in China; Australia’s largest export market. So we may well see further weakness in the Aussie Dollar but the month end is looming and traders in the UK will be preparing for a very long bank holiday weekend so don’t be surprised if we see some profit taking ahead of that.
The US data diary is very light this week but the major data comes to us tomorrow in the guise of the 2nd estimate of economic growth for the 1st quarter of the year. Traders will clearly be keeping their powder dry for that but the USD is being bought for its safe haven status and that has propelled it to its strongest levels against the Euro in 22 months and towards the bottom end of its trading range against the Pound.
And Italian Prime Minister Mario Monti needs that book about making friends and influencing people. You know the one. What’s it called? Oh yes, ‘How to win friends and influence people’, that’s it. In a country where football is the 2nd most popular religion, Mr Monti suggests football should be banned for 5 years as a penalty for all the match fixing and betting scandals that have shocked the country over the last few years. As he was not elected as such, he is probably not well placed to say such things and he certainly won’t be getting re-elected if he persists with the plan. It would be like David Cameron banning tea or something equally British like... chicken tikka masala. Unthinkable.
Wednesday, 30 May 2012
Wednesday, 23 May 2012
FX Market Overview
I have been out of the office for a few days so when I read the headlines this morning that the International Monetary Fund and the OECD (the name's too long so I will leave it at the acronym) warned Britain to cut interest rates and boost growth, I assumed Sterling would have dived. It hasn't. If anything, the Pound has strengthened a tad since Monday and the reason lies mainly with the inflation data released yesterday and international investors' attitude to risk.
UK CPI inflation fell from 3.5% previously to just 3.0% last month. That is still the roof of the Bank of England's 1% to 3% target range but it brought a sigh of relief from the markets because it frees the BOE's hand a little to boost growth without such a great risk of inflation. We get the minutes from the last BOE meeting this morning so that may shed some light on their thinking and we also get the UK retail sales data and , what is forecast to be a poor CBI industrial trends report so Sterling may be in for a bumpy ride this morning. Obviously, as the IMF and OECD states, the Eurozone crisis is the largest threat to the UK economy and that cannot be underestimated but Sterling is still not the euro so it retains a degree of safe haven status.
We can't have a currency market report without mentioning the Eurozone can we and this one is no exception. EU leaders still appear to be at loggerheads over what to do to resolve the crisis. Greece received another tranche of emergency funding which may tide them over until the elections on 17th June. Greece are not alone though; Ireland took €41 billion and Cyprus grabbed €4 billion as well. Spain held a bond auction yesterday and the yields being demanded by investors surged again on the short term bonds. However, there was some relief that the 10 year notes didn't follow suit and credit default insurance premiums on Spanish bonds dropped a tad as well. That didn't stop the euro from weakening though.
The US Dollar made fresh highs yesterday. It is the safe haven to beat all safe havens so with so much confusion in Europe and elsewhere, it is natural for the US Dollar to strengthen. There is little on the USD data front today so investor appetite for risk or safety is the main USD driver for the next 24 hours.
The Australian and New Zealand Dollars took a hit overnight after the OECD cut its growth forecast for China to 8.2% in 2012. That dampens expectations for Aussie and Kiwi exporters and casts a shadow over the economies of both countries. It also weakens commodity prices and we saw that weaken the Canadian Dollar to some extent as well. However, Canada is one of the few countries which is still talking of interest rate hikes so that does add some support to the Canadian Dollar.
Oh and I bet you will be glad to hear that it has arrived. Yes IT. The story we get every year has arrived. It is like the first sound of a cuckoo call or seeing the first crocuses. The newspapers are reporting that swimmers were shocked when they sighted a massive shark off the coast of Cornwall but...and this is the best bit... don't worry everyone because it is just a harmless Basking Shark and they don't eat us. Maybe it's the same Basking Shark that arrives every year at about this time and causes the same flipping headline.
UK CPI inflation fell from 3.5% previously to just 3.0% last month. That is still the roof of the Bank of England's 1% to 3% target range but it brought a sigh of relief from the markets because it frees the BOE's hand a little to boost growth without such a great risk of inflation. We get the minutes from the last BOE meeting this morning so that may shed some light on their thinking and we also get the UK retail sales data and , what is forecast to be a poor CBI industrial trends report so Sterling may be in for a bumpy ride this morning. Obviously, as the IMF and OECD states, the Eurozone crisis is the largest threat to the UK economy and that cannot be underestimated but Sterling is still not the euro so it retains a degree of safe haven status.
We can't have a currency market report without mentioning the Eurozone can we and this one is no exception. EU leaders still appear to be at loggerheads over what to do to resolve the crisis. Greece received another tranche of emergency funding which may tide them over until the elections on 17th June. Greece are not alone though; Ireland took €41 billion and Cyprus grabbed €4 billion as well. Spain held a bond auction yesterday and the yields being demanded by investors surged again on the short term bonds. However, there was some relief that the 10 year notes didn't follow suit and credit default insurance premiums on Spanish bonds dropped a tad as well. That didn't stop the euro from weakening though.
The US Dollar made fresh highs yesterday. It is the safe haven to beat all safe havens so with so much confusion in Europe and elsewhere, it is natural for the US Dollar to strengthen. There is little on the USD data front today so investor appetite for risk or safety is the main USD driver for the next 24 hours.
The Australian and New Zealand Dollars took a hit overnight after the OECD cut its growth forecast for China to 8.2% in 2012. That dampens expectations for Aussie and Kiwi exporters and casts a shadow over the economies of both countries. It also weakens commodity prices and we saw that weaken the Canadian Dollar to some extent as well. However, Canada is one of the few countries which is still talking of interest rate hikes so that does add some support to the Canadian Dollar.
Oh and I bet you will be glad to hear that it has arrived. Yes IT. The story we get every year has arrived. It is like the first sound of a cuckoo call or seeing the first crocuses. The newspapers are reporting that swimmers were shocked when they sighted a massive shark off the coast of Cornwall but...and this is the best bit... don't worry everyone because it is just a harmless Basking Shark and they don't eat us. Maybe it's the same Basking Shark that arrives every year at about this time and causes the same flipping headline.
Tuesday, 8 May 2012
FX Market Overview
Voting voting voting. Welcome back after an extended UK weekend in which elections dominated the news. Changes in UK local government management were as nought compared to the changes in Greece and France. A switch from austerity to growth may force the agenda in Europe as Angela Merkel's main supporter, President Sarkozy is ousted and the Eurozone's main cause of concern, Greece looks to be on a collision course with its EU "partners". It is Victory Day in France today to celebrate the end of hostilities in Europe at the end of the 2nd World War. It doesn’t end hostilities in Europe over the debt crisis though. The euro shed more than a cent against Sterling but a surprisingly strong 2.2 percent rise in German factory orders (reported this morning) has steadied the ship a little for now. This will be a busy week for the euro without a shadow of doubt.
US payrolls rose at a disappointing pace on Friday and the US Dollar weakened as a result. The Dollar has been a little undone by a lack of encouraging data of late but we haven't seen a surge in safe haven USD buying yet. However, further Eurozone turmoil could produce that flow of investor funds into the USD, just as it appears to be happening in the Pound, so beware.
It’s interesting that Sterling has taken on something of a safe haven air amidst the EU trauma. This week’s Bank of England interest rate and QE decisions are centre stage as the dip into a 2nd recession has raised the prospects of another expansion of the money supply. I can't help thinking that if they could get banks to lend the existing QE, we would have the problem at least partially solved.
Canada's Dollar weakened last week after the US employment report disappointed the markets; suggesting a slowdown in demand for Canada’s exports. A rise in oil prices kind of stabilised matters though.
Australia's trade deficit widened to the largest gap in roughly two and a half years as imports outpaced shrinking exports. That plus the escalating EU drama saw the Australian and the New Zealand Dollars weaken across the board as the chances of further interest rate cuts in Australasia rose. As you may remember, the Reserve Bank of Australia cut its base interest rate by an aggressive 50 basis points last week so markets are braced for more but this trade data will heighten that expectation.
And if you think the suggestive lyrics to modern songs don’t have an impact on children, a 6 year old boy in Denver, Colorado would agree. He has been suspended from school for sexual harassment for singing ‘I’m sexy and I know it’, a line from a popular song, in class. I can’t help thinking a 6 year old probably knew less about what constituted sexual harassment before he was suspended than afterwards.
US payrolls rose at a disappointing pace on Friday and the US Dollar weakened as a result. The Dollar has been a little undone by a lack of encouraging data of late but we haven't seen a surge in safe haven USD buying yet. However, further Eurozone turmoil could produce that flow of investor funds into the USD, just as it appears to be happening in the Pound, so beware.
It’s interesting that Sterling has taken on something of a safe haven air amidst the EU trauma. This week’s Bank of England interest rate and QE decisions are centre stage as the dip into a 2nd recession has raised the prospects of another expansion of the money supply. I can't help thinking that if they could get banks to lend the existing QE, we would have the problem at least partially solved.
Canada's Dollar weakened last week after the US employment report disappointed the markets; suggesting a slowdown in demand for Canada’s exports. A rise in oil prices kind of stabilised matters though.
Australia's trade deficit widened to the largest gap in roughly two and a half years as imports outpaced shrinking exports. That plus the escalating EU drama saw the Australian and the New Zealand Dollars weaken across the board as the chances of further interest rate cuts in Australasia rose. As you may remember, the Reserve Bank of Australia cut its base interest rate by an aggressive 50 basis points last week so markets are braced for more but this trade data will heighten that expectation.
And if you think the suggestive lyrics to modern songs don’t have an impact on children, a 6 year old boy in Denver, Colorado would agree. He has been suspended from school for sexual harassment for singing ‘I’m sexy and I know it’, a line from a popular song, in class. I can’t help thinking a 6 year old probably knew less about what constituted sexual harassment before he was suspended than afterwards.
Tuesday, 1 May 2012
FX Market Overview
It’s Mayday in more than one way. That is both a distress cry from Spain which fell back into recession over the last 3 months and the description of a Labour Day, Protest Day and public holiday in many parts of the world.
Monday was alive with trading opportunities and our dealers had a very busy day managing all the orders being triggered and trades being placed at some of the most attractive exchange rates in a long time ahead of a May Day holiday in most of Europe. European equities continued to fall due to Spain’s confirmation of recession, a decline in German retail sales and an afternoon of poor data from the other side of the Atlantic. Those investors bought into the safer option of bonds and that even brought the yield on Spanish debt down to some degree. There are rumours that the Spanish central bank is exploring ways and means to establish some kind of holding company in which to lodge the bad debts banks are holding in overpriced property assets/liabilities. Nonetheless, the lack of data and traders in Europe today should allow the Euro to trade sideways unless UK and US data markedly differs from expectations.
Later in the day, data was released showing a surprise contraction Canadian economic growth in Q1. A fall of 0.2% against expected growth of 0.2% came as a shock and the Canadian Dollar reacted as you might expect. Traders sold the loonie and we start today with the Canadian Dollar at weaker levels.
Yesterday’s US data wasn’t much better; personal income and spending data was mixed with income levels a tick up on estimates while expenditure was down a similar amount. Today’s manufacturing sector business sentiment report will be closely watched and the rest of the week is awash with US data so there will be plenty of opportunities for the markets to be wrong footed before the week is over.
Sterling had a day of gentle consolidation at the top end of its ranges. Sterling - Euro tested fresh 2012 highs and the Pound is doing likewise against the Australasian Dollars this morning after two pieces of overnight data. Australia’s reserve bank cut the base interest rate by 50 basis points rather than the expected 25BP. Their statement includes a lot of minimising comments; ‘somewhat’ lower growth and ‘tentative signs’ are mentioned. In essence, the slowdown on the global economy is worrying the RBA and they felt a pre-emptive strike would keep things on an even keel. The Chinese manufacturing sector purchasing managers index was up but not as much as expected and that was also a little unsettling for downunder traders who know that export led growth would answer the RBA’s concerns. So Sterling is pressing towards A$1.60 and NZ$2.00 this morning. We aren’t there yet though so if the UK manufacturing PMI is limp (after a bullish report last month) we could see the Pound give up some of its gains.
Aside from this, those of you on holiday today, have a great one, those who are working, never mind; we in the UK have got Monday off. And to everybody out there, pinch punch 1st day of the month and no returns. Oh and don’t give me any of your ‘White Rabbits’ nonsense; we both know you didn’t say it.
Monday was alive with trading opportunities and our dealers had a very busy day managing all the orders being triggered and trades being placed at some of the most attractive exchange rates in a long time ahead of a May Day holiday in most of Europe. European equities continued to fall due to Spain’s confirmation of recession, a decline in German retail sales and an afternoon of poor data from the other side of the Atlantic. Those investors bought into the safer option of bonds and that even brought the yield on Spanish debt down to some degree. There are rumours that the Spanish central bank is exploring ways and means to establish some kind of holding company in which to lodge the bad debts banks are holding in overpriced property assets/liabilities. Nonetheless, the lack of data and traders in Europe today should allow the Euro to trade sideways unless UK and US data markedly differs from expectations.
Later in the day, data was released showing a surprise contraction Canadian economic growth in Q1. A fall of 0.2% against expected growth of 0.2% came as a shock and the Canadian Dollar reacted as you might expect. Traders sold the loonie and we start today with the Canadian Dollar at weaker levels.
Yesterday’s US data wasn’t much better; personal income and spending data was mixed with income levels a tick up on estimates while expenditure was down a similar amount. Today’s manufacturing sector business sentiment report will be closely watched and the rest of the week is awash with US data so there will be plenty of opportunities for the markets to be wrong footed before the week is over.
Sterling had a day of gentle consolidation at the top end of its ranges. Sterling - Euro tested fresh 2012 highs and the Pound is doing likewise against the Australasian Dollars this morning after two pieces of overnight data. Australia’s reserve bank cut the base interest rate by 50 basis points rather than the expected 25BP. Their statement includes a lot of minimising comments; ‘somewhat’ lower growth and ‘tentative signs’ are mentioned. In essence, the slowdown on the global economy is worrying the RBA and they felt a pre-emptive strike would keep things on an even keel. The Chinese manufacturing sector purchasing managers index was up but not as much as expected and that was also a little unsettling for downunder traders who know that export led growth would answer the RBA’s concerns. So Sterling is pressing towards A$1.60 and NZ$2.00 this morning. We aren’t there yet though so if the UK manufacturing PMI is limp (after a bullish report last month) we could see the Pound give up some of its gains.
Aside from this, those of you on holiday today, have a great one, those who are working, never mind; we in the UK have got Monday off. And to everybody out there, pinch punch 1st day of the month and no returns. Oh and don’t give me any of your ‘White Rabbits’ nonsense; we both know you didn’t say it.
Thursday, 26 April 2012
FX Market Overview
Those headlines you read in your paper this morning are out of date. Sterling did drop after the announcement that we are in a 2nd recession and there is no doubting it was a surprise but that’s old news. After weeks of positive data, the drop in UK GDP took traders by surprise. It was clearly a gift to the press, to the Murdochs who were forced off the front pages and to the opposition parties ahead of Prime Ministers Questions but Gross Domestic Product figure is a backward looking set of data. So after careful consideration, the markets chose to rely more upon the forward looking statistics like the very positive Purchasing Managers Indices and yesterday’s CBI report which was hugely upbeat. After all the volatility, Sterling ended the day pretty well where it started and is still strong this morning. I am convinced the 2nd calculation of the GDP figures, which includes much more of the completed data, will be revised upward when it is released in a few weeks time and that, having weathered this storm, Sterling has the legs to strengthen further. It seems many in the forex market share that view. Today brings the retail portion of the CBI report; if that’s as upbeat as the industrial one, Sterling should strengthen and we get the British Bankers Association mortgage data which will also be closely watched.
The story from the other side of the Atlantic was equally unexpected; Durable goods orders were much worse than expected; falling 4.2% on the month. Consumer confidence was also down and the housing data was mixed. The Federal Reserve did little to reassure the markets; they left their base rate on hold and did the same with the level of quantitative easing but they signalled that further QE was possible if needed. In a slightly contrary move, a number of members of the Open Market Committee brought forward their forecasts for the 1st interest rate hike. None though, thought it would be in 2013 so the markets felt justified in selling the US Dollar and that is where the day ended. There is a smattering of US data today. The weekly jobless claims numbers will be most influential but tomorrow’s economic growth figures are more pressing so the US Dollar could remain in a holding pattern ahead of that.
Overnight we head that the Reserve Bank of New Zealand followed suit and kept its base rate on hold. That was expected but Governor Alan Bollard made it clear that the continuing strength of the New Zealand Dollar in spite of a drop in commodity prices could force the RBNZ to maintain their base rate at this historically low level for an extended period. Traders are betting on no increase this year so the NZ Dollar could weaken further after that news and, given the influence that the Australian Dollar has on this currency, with next week’s inevitable interest rate cut from the RBA, that isn’t a particularly controversial forecast.
For once, the Euro was not the main talking point and Europe’s shared currency was pitched and rolled by events outside its borders and outside the Eurozone’s control. In the end the euro remained in relatively tight ranges and made a little headway against the weaker US Dollar and remained static overall against the Pound. We get Eurozone consumer and industrial confidence figures today which could cause some fuss and German inflation figures which are always worth a look but we may see a reasonably quiet trading day ahead of tomorrow’s release of the US growth data which is hugely influential.
And finally, if you got an invitation from the government to attend a formal dinner and presentation about the environment, you would feel flattered, get dressed up and go wouldn’t you. Well that’s what Margareta Winberg did when the Swedish Environment Minister invited her. Unfortunately there is another Margareta Winberg who isn’t a retired occupational therapist but who was in fact the former Deputy Prime Minister and it was that Margareta Winberg who should have received the invitation. Apparently the Margaret who did attend had a lovely day and was introduced to ministers and the great and good of Sweden. And why not.
The story from the other side of the Atlantic was equally unexpected; Durable goods orders were much worse than expected; falling 4.2% on the month. Consumer confidence was also down and the housing data was mixed. The Federal Reserve did little to reassure the markets; they left their base rate on hold and did the same with the level of quantitative easing but they signalled that further QE was possible if needed. In a slightly contrary move, a number of members of the Open Market Committee brought forward their forecasts for the 1st interest rate hike. None though, thought it would be in 2013 so the markets felt justified in selling the US Dollar and that is where the day ended. There is a smattering of US data today. The weekly jobless claims numbers will be most influential but tomorrow’s economic growth figures are more pressing so the US Dollar could remain in a holding pattern ahead of that.
Overnight we head that the Reserve Bank of New Zealand followed suit and kept its base rate on hold. That was expected but Governor Alan Bollard made it clear that the continuing strength of the New Zealand Dollar in spite of a drop in commodity prices could force the RBNZ to maintain their base rate at this historically low level for an extended period. Traders are betting on no increase this year so the NZ Dollar could weaken further after that news and, given the influence that the Australian Dollar has on this currency, with next week’s inevitable interest rate cut from the RBA, that isn’t a particularly controversial forecast.
For once, the Euro was not the main talking point and Europe’s shared currency was pitched and rolled by events outside its borders and outside the Eurozone’s control. In the end the euro remained in relatively tight ranges and made a little headway against the weaker US Dollar and remained static overall against the Pound. We get Eurozone consumer and industrial confidence figures today which could cause some fuss and German inflation figures which are always worth a look but we may see a reasonably quiet trading day ahead of tomorrow’s release of the US growth data which is hugely influential.
And finally, if you got an invitation from the government to attend a formal dinner and presentation about the environment, you would feel flattered, get dressed up and go wouldn’t you. Well that’s what Margareta Winberg did when the Swedish Environment Minister invited her. Unfortunately there is another Margareta Winberg who isn’t a retired occupational therapist but who was in fact the former Deputy Prime Minister and it was that Margareta Winberg who should have received the invitation. Apparently the Margaret who did attend had a lovely day and was introduced to ministers and the great and good of Sweden. And why not.
Wednesday, 18 April 2012
FX Market Overview
We were not short of talking points yesterday and the volatility followed every word. It would take a much longer report than this to do it all justice but I will rattle through the headlines to give you a flavor of the interest and intrigue.
UK inflation ticked up to 3.5% on the annualized CPI reading. That’s the first rise since September and the wrong direction as far as the Bank of England is concerned. Slow growth and stubbornly high inflation is not what the doctor ordered for the Chancellor either but Sterling held its nerve and stayed at the top of its trading ranges. All eyes turn to this morning’s twin releases of unemployment and the Bank of England minutes. An improvement in the employment picture and less evidence that the BOE is ready to top up the QE levels would be Sterling’s best result and we may just see some more strength in the Pound.
On the euro front, Eurozone inflation was revised up from 2.6% t 2.7% in March and we saw a draft EU paper that revealed that the EU, IMF and ECB see no need for further cash injections into Greece but they see a very real need for Greece to step up the austerity measures in the next two years. If they are to achieve the deficit targets set by the EU. The German Finance Minister Schaeuble says he wants the G20 to approve a boost the International Monetary Fund’s resources by around $ 400 Billion when they next meet. He also said that Spain and Italy are both meeting debt reduction measures. The other, slightly surprising positive data was a 5th straight month of improvement in German business confidence as measured by the ZEW institute. The euro remained rather sanguine though. Spanish debt auctions were surprisingly well subscribed but the yields Spain is having to pay also rose and that is a very worrying sign. Overall the Euro weakened on the day but not dramatically so.
And the IMF were in the news again with their Chief Economist suggesting the world economy is in an “uneasy calm” and that there is a feeling that things could get bad again. However, the IMF also raised global growth forecasts. They upgraded their forecasts for America, the Eurozone and Britain. Their global growth forecast for 2012 was raised to 3.5%, while in the US it was upgraded to 2.1% and the UK was upgraded to 0.8%. Let’s hope their optimism proves correct.
The Bank of Canada kept their interest rates unchanged at 1 percent. This was widely expected but the fact that the BOC also upgraded their growth forecast for the year to 2.4% was not. They cited improving growth and that ties in with improving US data.
On that front, the data diary throws a few curveballs into the mix on US data; US housing starts were weak at 645,000 compared to the forecast of 705,000. That is in fact the weakest reading since last October but that may be a short term issue because building permits were the highest they've been since 2008. It all serves to keep us on our toes though. Just as confusing is the fact that US industrial production was weaker than expected; offering zero growth in March compared to a 0.3% forecast. Factors such as nervousness in other investments kept the US Dollar strong though through safe haven buying.
Overnight tonight we will get New Zealand inflation figures. A bounce back is expected which will reduce the expectations of interest rate cuts in NZ and should strengthen the New Zealand Dollar to some degree. Those who need to buy Kiwi Dollars may want to do so today to avoid the risk of weaker rates tomorrow.
And China has loosened the money supply buy reducing the percentage than banks have to hold in reserve slightly. That will lead to further growth and that is positive for the region and the Australasian dollars because Australia and New Zealand are heavily reliant on Chinese demand.
*****STOP PRESS***** Bank of England monetary policy committee voted 8-1 in favour of maintaining the quantitative easing level and that is a move of one member away from further stimulus. Sterling is benefiting from this and from a drop in the unemployment level to 8.3% from 8.4% last month. *****STOP PRESS*****
Sorry gotta dash; it’s all kicking off as they say and we are set fair for a lively day. Sterling sellers may be getting their prayers answered at last. Have a great day.
UK inflation ticked up to 3.5% on the annualized CPI reading. That’s the first rise since September and the wrong direction as far as the Bank of England is concerned. Slow growth and stubbornly high inflation is not what the doctor ordered for the Chancellor either but Sterling held its nerve and stayed at the top of its trading ranges. All eyes turn to this morning’s twin releases of unemployment and the Bank of England minutes. An improvement in the employment picture and less evidence that the BOE is ready to top up the QE levels would be Sterling’s best result and we may just see some more strength in the Pound.
On the euro front, Eurozone inflation was revised up from 2.6% t 2.7% in March and we saw a draft EU paper that revealed that the EU, IMF and ECB see no need for further cash injections into Greece but they see a very real need for Greece to step up the austerity measures in the next two years. If they are to achieve the deficit targets set by the EU. The German Finance Minister Schaeuble says he wants the G20 to approve a boost the International Monetary Fund’s resources by around $ 400 Billion when they next meet. He also said that Spain and Italy are both meeting debt reduction measures. The other, slightly surprising positive data was a 5th straight month of improvement in German business confidence as measured by the ZEW institute. The euro remained rather sanguine though. Spanish debt auctions were surprisingly well subscribed but the yields Spain is having to pay also rose and that is a very worrying sign. Overall the Euro weakened on the day but not dramatically so.
And the IMF were in the news again with their Chief Economist suggesting the world economy is in an “uneasy calm” and that there is a feeling that things could get bad again. However, the IMF also raised global growth forecasts. They upgraded their forecasts for America, the Eurozone and Britain. Their global growth forecast for 2012 was raised to 3.5%, while in the US it was upgraded to 2.1% and the UK was upgraded to 0.8%. Let’s hope their optimism proves correct.
The Bank of Canada kept their interest rates unchanged at 1 percent. This was widely expected but the fact that the BOC also upgraded their growth forecast for the year to 2.4% was not. They cited improving growth and that ties in with improving US data.
On that front, the data diary throws a few curveballs into the mix on US data; US housing starts were weak at 645,000 compared to the forecast of 705,000. That is in fact the weakest reading since last October but that may be a short term issue because building permits were the highest they've been since 2008. It all serves to keep us on our toes though. Just as confusing is the fact that US industrial production was weaker than expected; offering zero growth in March compared to a 0.3% forecast. Factors such as nervousness in other investments kept the US Dollar strong though through safe haven buying.
Overnight tonight we will get New Zealand inflation figures. A bounce back is expected which will reduce the expectations of interest rate cuts in NZ and should strengthen the New Zealand Dollar to some degree. Those who need to buy Kiwi Dollars may want to do so today to avoid the risk of weaker rates tomorrow.
And China has loosened the money supply buy reducing the percentage than banks have to hold in reserve slightly. That will lead to further growth and that is positive for the region and the Australasian dollars because Australia and New Zealand are heavily reliant on Chinese demand.
*****STOP PRESS***** Bank of England monetary policy committee voted 8-1 in favour of maintaining the quantitative easing level and that is a move of one member away from further stimulus. Sterling is benefiting from this and from a drop in the unemployment level to 8.3% from 8.4% last month. *****STOP PRESS*****
Sorry gotta dash; it’s all kicking off as they say and we are set fair for a lively day. Sterling sellers may be getting their prayers answered at last. Have a great day.
Monday, 16 April 2012
FX Market Overview
Having survived Friday 13th I think we should all start our own water companies. Having declared parts of the country as drought zones and after having imposed a hose pipe ban elsewhere, they can carry on charging the same annual fee. I can’t think of any other industry where you can - by law - force people to use less but don’t have to cut their subscriptions. Imagine; “sorry sir, you can only have a 9” pizza but I have to charge you for a 14” one. It’s the law”. Perhaps if the water companies had to take an income reduction when they implement hose pipe bans, they would start to fix the burst pipes before paying bonuses.
China had a proper Friday 13th, after economic growth statistics showed China is still slowing down. At 8.1%, China’s Q1 GDP figure was below expectations and the lowest in 3 years. That sent jitters through the foreign exchange market but not perhaps the shock wave that many would have expected. Shares did slip on the news and there is a fear that the slide will extend into this week.
Te impact of Chinese data is normally very evident in the Australian Dollar but there has been only a small strengthening of the Aussie Dollar in the last few days. Traders are awaiting the minutes from the last Reserve Bank of Australia meeting and next week’s release of the Australian inflation report (due on 24th) to determine what to do with the Aussie Dollar. If the RBA keep to their previous tone, we can expect an interest rate cut at their next meeting and China’s falling demand would certainly suggest that is the most likely scenario.
Nearer home, the Eurozone continues to cause dramas. The Euro is 13 years old this year and any parent of a teenager will recognize the signs; won’t do what you say, won’t save any money, spends every penny it can get its hands on, never says thank you and stays out late without explanation. (Well perhaps not that one but you get my point). At the moment we are awaiting the next Spanish debt auction to determine whether Spain is asked to pay more than 6% again. That would be yet another sign that investors are unconvinced by the plans to stabilize debt in the Eurozone and perhaps further evidence that they don’t believe the EU speakers who claim there is no need for a Greece style bailout for Spain. We get Eurozone inflation this week as well as a number of German statistics on trade and business confidence. We also get a number of speeches from EU and ECB personnel so the euro is in for another bouncy week. That’s a technical term by the way. Oh and this weekend brings the 1st round of French Presidential elections. Will Sarkozy be the 1st casualty of the Euro debt crisis?
Sterling is still looking poised to strengthen in spite of all the drama going n around its ears. We remain at the top of the Sterling - Euro and Sterling - Australasian Dollar ranges and even the political fallout from the budget is not moving it lower. By the way, I can’t help thinking that someone who says ‘I won’t give to charity unless I get a tax break’ is clearly not as charitable as they would like us to believe. Nevertheless, the Pound is probably punching above its weight at the moment. That is not to say it won’t continue to do so and cannot strengthen further but we are waiting for a catalyst to make that happen. I doubt this week’s release of the minutes from the last Bank of England meeting are enough to make that happen but we shall see. We do also get inflation data and a number of other indices this week from the UK so we will see whether the Pound summons up enough fortitude to break to higher levels.
And finally, the Chinese Grand Prix was one of the most interesting and exciting F1 races I have seen in years. I may even start watching it regularly. Have a good week.
China had a proper Friday 13th, after economic growth statistics showed China is still slowing down. At 8.1%, China’s Q1 GDP figure was below expectations and the lowest in 3 years. That sent jitters through the foreign exchange market but not perhaps the shock wave that many would have expected. Shares did slip on the news and there is a fear that the slide will extend into this week.
Te impact of Chinese data is normally very evident in the Australian Dollar but there has been only a small strengthening of the Aussie Dollar in the last few days. Traders are awaiting the minutes from the last Reserve Bank of Australia meeting and next week’s release of the Australian inflation report (due on 24th) to determine what to do with the Aussie Dollar. If the RBA keep to their previous tone, we can expect an interest rate cut at their next meeting and China’s falling demand would certainly suggest that is the most likely scenario.
Nearer home, the Eurozone continues to cause dramas. The Euro is 13 years old this year and any parent of a teenager will recognize the signs; won’t do what you say, won’t save any money, spends every penny it can get its hands on, never says thank you and stays out late without explanation. (Well perhaps not that one but you get my point). At the moment we are awaiting the next Spanish debt auction to determine whether Spain is asked to pay more than 6% again. That would be yet another sign that investors are unconvinced by the plans to stabilize debt in the Eurozone and perhaps further evidence that they don’t believe the EU speakers who claim there is no need for a Greece style bailout for Spain. We get Eurozone inflation this week as well as a number of German statistics on trade and business confidence. We also get a number of speeches from EU and ECB personnel so the euro is in for another bouncy week. That’s a technical term by the way. Oh and this weekend brings the 1st round of French Presidential elections. Will Sarkozy be the 1st casualty of the Euro debt crisis?
Sterling is still looking poised to strengthen in spite of all the drama going n around its ears. We remain at the top of the Sterling - Euro and Sterling - Australasian Dollar ranges and even the political fallout from the budget is not moving it lower. By the way, I can’t help thinking that someone who says ‘I won’t give to charity unless I get a tax break’ is clearly not as charitable as they would like us to believe. Nevertheless, the Pound is probably punching above its weight at the moment. That is not to say it won’t continue to do so and cannot strengthen further but we are waiting for a catalyst to make that happen. I doubt this week’s release of the minutes from the last Bank of England meeting are enough to make that happen but we shall see. We do also get inflation data and a number of other indices this week from the UK so we will see whether the Pound summons up enough fortitude to break to higher levels.
And finally, the Chinese Grand Prix was one of the most interesting and exciting F1 races I have seen in years. I may even start watching it regularly. Have a good week.
Wednesday, 11 April 2012
FX Market Overview
Tuesday’s foreign exchange market activity revolved around the repercussions of Friday’s poor US employment data. Traders are on permanent tenterhooks these days so something as potentially damaging as slow growth in US employment is bound to have far reaching consequences. Share markets around the globe slipped and nervous investors stayed with the tried and tested safe havens of treasury certificates in countries like America, Japan and Switzerland. The effect on the currencies of these countries is pretty obvious; they strengthened.
That nervous feeling wasn’t helped by poor French industrial production and the lack of data elsewhere meant there was little to calm nerves. There was a lot of focus on a speech by the head of the US Federal Reserve in which Chairman Bernanke suggested financial markets need tighter regulation but all anyone in the press seems to have gleaned from his speech is that the Federal Reserve is not planning further quantitative easing in the months ahead. That is another reason for US Dollar strength.
The other major influence and concern is the rising cost that European governments are facing for their borrowing. Spain, Portugal and - well the usual suspects - are finding the gap is expanding between the interest rates they have to pay and those that the likes of France and Germany face when issuing new bonds. That is a cost and a drag on recovery but it is also a clear sign that the markets are not yet convinced that Europe is on top of its debt problems and that must be a huge worry for the European Central Bank and the EU. It must also be worrying the likes of the International Monetary Fund and its contributors because their cash is on the line and the IMF has a track record of always returning loaned funds to its contributors; a record it will not want to spoil.
Sterling continues to trade at the upper end of its recent ranges. A positive report from the British Retail Consortium helped that but; as is always the case with retail data, the search for a reason for the improvement - in this case, sunnier weather - tends to dampen the influence of such data. Nevertheless, Sterling is trying - but so far failing - to break through the top of those ranges. The optimists amongst you may want to target higher levels just in case we see a breakout whilst the realists, pessimists and pragmatists may want to cover some of your requirements now just in case we see a fall back in the Pound. The arch-nemesis of Sterling strength is Bank of England Governor Mervyn King. Mr King tends to pop up on each occasion when Sterling is strengthening and cause a slump but he has been notable by his absence on this occasion. How long he can stay quiet is probably something we should have an office sweepstake on.
Further afield, New Zealand business confidence rose in the 1st quarter of the year. That plus mixed signals coming from Japan and China have caused a fair amount of volatility in the New Zealand Dollar over the last week or so. This business confidence survey does go some way to confirming the resilience of the Kiwi economy and that may be the factor that stops Sterling from rallying against the Kiwi Dollar. However, a fall in commodity prices and jitters over the strength of the European economy are weighing on investor confidence. Nervous investors do tend to steer clear of the high yielding Australasian Dollars which are evidently lucrative places to lodge your money but are also perceived as carrying a higher exchange rate risk.
Today’s diary includes consumer inflation data from Sweden, France, Portugal and Ireland, producer price indices form America and the US trade balance. All of these have the potential to change perceptions but we are also going to hear speeches from several European Central Bank members and a number of US Federal Reserve Chairmen. These have the potential to be every bit as influential as the hard data so we are certain of some volatility if nothing else.
And finally, I am not quite sure I understand the morbid fascination with the Titanic but the loss of so many lives and loss of an “unsinkable” ship clearly hold the rapt attention of many. I certainly can’t imagine wanting to go on a recreation cruise but that is what 1,300 odd people have done aboard the _________. It is very authentic. Heavy seas have slowed their progress and a passenger has had to be airlifted to hospital after a heart problem. As they haven’t yet cleared the Irish Sea, no icebergs have been encountered. Let’s hope it stays that way for all their sakes.
That nervous feeling wasn’t helped by poor French industrial production and the lack of data elsewhere meant there was little to calm nerves. There was a lot of focus on a speech by the head of the US Federal Reserve in which Chairman Bernanke suggested financial markets need tighter regulation but all anyone in the press seems to have gleaned from his speech is that the Federal Reserve is not planning further quantitative easing in the months ahead. That is another reason for US Dollar strength.
The other major influence and concern is the rising cost that European governments are facing for their borrowing. Spain, Portugal and - well the usual suspects - are finding the gap is expanding between the interest rates they have to pay and those that the likes of France and Germany face when issuing new bonds. That is a cost and a drag on recovery but it is also a clear sign that the markets are not yet convinced that Europe is on top of its debt problems and that must be a huge worry for the European Central Bank and the EU. It must also be worrying the likes of the International Monetary Fund and its contributors because their cash is on the line and the IMF has a track record of always returning loaned funds to its contributors; a record it will not want to spoil.
Sterling continues to trade at the upper end of its recent ranges. A positive report from the British Retail Consortium helped that but; as is always the case with retail data, the search for a reason for the improvement - in this case, sunnier weather - tends to dampen the influence of such data. Nevertheless, Sterling is trying - but so far failing - to break through the top of those ranges. The optimists amongst you may want to target higher levels just in case we see a breakout whilst the realists, pessimists and pragmatists may want to cover some of your requirements now just in case we see a fall back in the Pound. The arch-nemesis of Sterling strength is Bank of England Governor Mervyn King. Mr King tends to pop up on each occasion when Sterling is strengthening and cause a slump but he has been notable by his absence on this occasion. How long he can stay quiet is probably something we should have an office sweepstake on.
Further afield, New Zealand business confidence rose in the 1st quarter of the year. That plus mixed signals coming from Japan and China have caused a fair amount of volatility in the New Zealand Dollar over the last week or so. This business confidence survey does go some way to confirming the resilience of the Kiwi economy and that may be the factor that stops Sterling from rallying against the Kiwi Dollar. However, a fall in commodity prices and jitters over the strength of the European economy are weighing on investor confidence. Nervous investors do tend to steer clear of the high yielding Australasian Dollars which are evidently lucrative places to lodge your money but are also perceived as carrying a higher exchange rate risk.
Today’s diary includes consumer inflation data from Sweden, France, Portugal and Ireland, producer price indices form America and the US trade balance. All of these have the potential to change perceptions but we are also going to hear speeches from several European Central Bank members and a number of US Federal Reserve Chairmen. These have the potential to be every bit as influential as the hard data so we are certain of some volatility if nothing else.
And finally, I am not quite sure I understand the morbid fascination with the Titanic but the loss of so many lives and loss of an “unsinkable” ship clearly hold the rapt attention of many. I certainly can’t imagine wanting to go on a recreation cruise but that is what 1,300 odd people have done aboard the _________. It is very authentic. Heavy seas have slowed their progress and a passenger has had to be airlifted to hospital after a heart problem. As they haven’t yet cleared the Irish Sea, no icebergs have been encountered. Let’s hope it stays that way for all their sakes.
Tuesday, 10 April 2012
FX Market Overview
I hope your Easter break was a restful one because this could be a very busy week. Even as the UK relaxed on Good Friday, the data continued to arrive. The major news was that US employment numbers failed to meet expectations in March. Just 120,000 fresh jobs were created; well below the expected 200,000 and that raised concerns that the US economic recovery may be running out of steam. Shares dipped and equities rose just to reinforce the slight change of sentiment. We will get all manner of views on that from a host of Federal Reserve speakers in the next few days so the rumour and speculation mills will be whirring away at full speed. Volatile conditions will follow.
Asian data was also in the spotlight; the Bank of Japan left its base interest rate at a paltry 0/1 percent and rejected calls to pump more money into the economy. That strengthened the Yen and weakened the currencies of some of Japan’s major trading partners. And China announced an unexpected trade surplus of some $5.35 billion as imports were reduced. That puts pressure on the currencies of the countries that export most to China. Those countries include Australia and New Zealand, Japan and many smaller Asian countries.
Nearer home, the gap between the interest being demanded from Spain on its government bonds and the equivalent from Germany is causing major concerns. The gap means Spain is paying a full 4 percentage points more for its borrowing than Germany as investors seek a ‘risk premium’ on loans to the troubled Mediterranean country. Portugal, Italy and Greece are all in the same boat in terms of borrowing costs and that makes these debts unsustainable in the long term. If that were not enough to worry euro investors, Germany’s poor industrial production figures, released last week, have really given them the jitters. If Germany, the principle lender to these countries (by proxy via the ECB, EU and IMF) is struggling, where is the cheap funding going to come from and will the status quo be maintainable after the upcoming German and French elections where these bailout funds are very unpopular. This week brings Eurozone-wide industrial production data and German inflation numbers, just to keep tongues wagging.
In the UK, traders will return from their chocolate egg binge to find the pound doing rather well overall. Whilst you could certainly argue that recent UK data is too mixed to support a strong pound, these things are all relative. The comparative position of the Eurozone and the effects of the far eastern slowdown do have the effect of making the UK look kind of well-placed and that is benefitting the Pound. Be careful of expecting a lot more Sterling strength though. Whenever the Pound shows signs of life, the Governor of the Bank of England can be relied upon to whip the rug out from beneath the Pound and we should expect that kind of talk this week. Data wise, this is a very quiet week for the UK so GBP will be wafted hither and thither by external influences but the overnight release of a pretty upbeat RICS housing market survey didn’t do the Pound any harm. Whilst most surveyors still reported a drop in house prices, the falls are smaller and the demand is picking up. Perhaps Sterling has a chance of pushing up through some of these tough resistance levels in the days ahead - as long as Mervyn King keeps schtum.
That Chinese trade surplus has weakened the Australian and New Zealand Dollars marginally as analysts try to assess the impact on these countries’ export output but, against the Pound, both currencies remain just within recent ranges. As I mentioned earlier, if the Pound can avoid a negative, we may just see a push to higher levels in these exchange rates in the next few days but I am concerned that those may be little more than spikes, so rather than waiting and missing the opportunity, an automated market order will be the best tool for the job in this environment.
Away from the markets, after a bizarre incident packed boat race, the self-styled, anti-elitism protester was largely unharmed and lucky not to have been forever known as the headless anti-elitism protester. And Alex Woods, the Oxford Bowman who collapsed has apologised to victors Cambridge for spoiling their celebrations which were cancelled while he was taken to hospital. You see, Mr Balotelli that is known as sportsmanship and good manners. You could do with an extended course.
Asian data was also in the spotlight; the Bank of Japan left its base interest rate at a paltry 0/1 percent and rejected calls to pump more money into the economy. That strengthened the Yen and weakened the currencies of some of Japan’s major trading partners. And China announced an unexpected trade surplus of some $5.35 billion as imports were reduced. That puts pressure on the currencies of the countries that export most to China. Those countries include Australia and New Zealand, Japan and many smaller Asian countries.
Nearer home, the gap between the interest being demanded from Spain on its government bonds and the equivalent from Germany is causing major concerns. The gap means Spain is paying a full 4 percentage points more for its borrowing than Germany as investors seek a ‘risk premium’ on loans to the troubled Mediterranean country. Portugal, Italy and Greece are all in the same boat in terms of borrowing costs and that makes these debts unsustainable in the long term. If that were not enough to worry euro investors, Germany’s poor industrial production figures, released last week, have really given them the jitters. If Germany, the principle lender to these countries (by proxy via the ECB, EU and IMF) is struggling, where is the cheap funding going to come from and will the status quo be maintainable after the upcoming German and French elections where these bailout funds are very unpopular. This week brings Eurozone-wide industrial production data and German inflation numbers, just to keep tongues wagging.
In the UK, traders will return from their chocolate egg binge to find the pound doing rather well overall. Whilst you could certainly argue that recent UK data is too mixed to support a strong pound, these things are all relative. The comparative position of the Eurozone and the effects of the far eastern slowdown do have the effect of making the UK look kind of well-placed and that is benefitting the Pound. Be careful of expecting a lot more Sterling strength though. Whenever the Pound shows signs of life, the Governor of the Bank of England can be relied upon to whip the rug out from beneath the Pound and we should expect that kind of talk this week. Data wise, this is a very quiet week for the UK so GBP will be wafted hither and thither by external influences but the overnight release of a pretty upbeat RICS housing market survey didn’t do the Pound any harm. Whilst most surveyors still reported a drop in house prices, the falls are smaller and the demand is picking up. Perhaps Sterling has a chance of pushing up through some of these tough resistance levels in the days ahead - as long as Mervyn King keeps schtum.
That Chinese trade surplus has weakened the Australian and New Zealand Dollars marginally as analysts try to assess the impact on these countries’ export output but, against the Pound, both currencies remain just within recent ranges. As I mentioned earlier, if the Pound can avoid a negative, we may just see a push to higher levels in these exchange rates in the next few days but I am concerned that those may be little more than spikes, so rather than waiting and missing the opportunity, an automated market order will be the best tool for the job in this environment.
Away from the markets, after a bizarre incident packed boat race, the self-styled, anti-elitism protester was largely unharmed and lucky not to have been forever known as the headless anti-elitism protester. And Alex Woods, the Oxford Bowman who collapsed has apologised to victors Cambridge for spoiling their celebrations which were cancelled while he was taken to hospital. You see, Mr Balotelli that is known as sportsmanship and good manners. You could do with an extended course.
Wednesday, 28 March 2012
FX Market Overview
According to the Confederation of British Industry, UK high street sales improved again in March all the way back to an index reading of 0. That might look a bit pathetic but it was minus 2 in February and the markets were expecting the index to weaken rather than strengthen. However, the failure of the Game group is sobering evidence that retailers are not out of the woods yet and the sales environment is challenging to say the least. Nonetheless, in the absence of any other UK data, traders took the CBI report as a positive sign and Sterling had rather a good day. Hopefully, that optimism will remain after this morning’s release of the UK economic growth data. This is the final calculation of the quarter 4 growth figures and we expect the -0.2% quarterly figure and the annualised +0.7% will be confirmed.
Sterling was also flattered by the weakness of the US Dollar. The Federal Reserve Chairman has been talking about further expansion of the US money supply through quantitative easing measures and in true supply and demand style that has had a negative effect on the value of the USD. The slight dip in US consumer confidence shown in yesterday’s report didn’t do anything to improve that situation. Perhaps this afternoon’s US durable goods data will improve the mood a little. We are expecting a rebound from last month’s minus 3.7% reading to perhaps 3% growth so that would boost confidence a tad.
European news remains worrisome; Spain is in recession and is announcing plans to slash spending but expected the economy to shrink by 1.5% this year. And Germany has announced that the German parliament will have a far greater say over any further EU bailout funds. That is not what Chancellor Merkel wants to hear because her grip on power over this subject is tenuous at best; even her coalition partners are cautious. And while this is going on, the Greek parliament is embroiled in serious in-fighting over the austerity measures forced upon them by Brussels in return for rescue funds. They are playing the problem down but it is yet another example of the politically created and supported euro causing serious political problems for its supporters. Whether that leads to a weakening of the support for the euro is a moot point at this stage but traders are cautious.
Meanwhile, nervousness over news and data coming from China has weakened the Australian and New Zealand Dollars and also the Canadian Dollar and South African Rand. China is such an enormous importer of commodities and is Australia’s chief export market so it is understandable that any hint of weakness in China’s economy will weaken the currencies of the providing nations. In fact, for those needing to buy Aussie Dollars, the current Sterling - Australian Dollar exchange rate is the most attractive it has been since 29th December 2011. That has put a smile on the faces of those moving to or importing from Australia; a smile that has been absent for quite a while. It is hard to know whether this is the start of a largest scale recovery but it is certainly an opportune moment to be grabbing some Aussie Dollars.
And as Britain agonises over who we might offend if we deport Abu Qatada and how the poor mite could be treated in Jordan, Italy ignores a court order and deports a convicted terrorist. And now the European Court of Human Rights has said they can’t make Italy reverse the deportation. Who is right and wrong? Only you can decide but should Italy and Britain be allowed to decide who lives in their country and who does not? You betcha.
Sterling was also flattered by the weakness of the US Dollar. The Federal Reserve Chairman has been talking about further expansion of the US money supply through quantitative easing measures and in true supply and demand style that has had a negative effect on the value of the USD. The slight dip in US consumer confidence shown in yesterday’s report didn’t do anything to improve that situation. Perhaps this afternoon’s US durable goods data will improve the mood a little. We are expecting a rebound from last month’s minus 3.7% reading to perhaps 3% growth so that would boost confidence a tad.
European news remains worrisome; Spain is in recession and is announcing plans to slash spending but expected the economy to shrink by 1.5% this year. And Germany has announced that the German parliament will have a far greater say over any further EU bailout funds. That is not what Chancellor Merkel wants to hear because her grip on power over this subject is tenuous at best; even her coalition partners are cautious. And while this is going on, the Greek parliament is embroiled in serious in-fighting over the austerity measures forced upon them by Brussels in return for rescue funds. They are playing the problem down but it is yet another example of the politically created and supported euro causing serious political problems for its supporters. Whether that leads to a weakening of the support for the euro is a moot point at this stage but traders are cautious.
Meanwhile, nervousness over news and data coming from China has weakened the Australian and New Zealand Dollars and also the Canadian Dollar and South African Rand. China is such an enormous importer of commodities and is Australia’s chief export market so it is understandable that any hint of weakness in China’s economy will weaken the currencies of the providing nations. In fact, for those needing to buy Aussie Dollars, the current Sterling - Australian Dollar exchange rate is the most attractive it has been since 29th December 2011. That has put a smile on the faces of those moving to or importing from Australia; a smile that has been absent for quite a while. It is hard to know whether this is the start of a largest scale recovery but it is certainly an opportune moment to be grabbing some Aussie Dollars.
And as Britain agonises over who we might offend if we deport Abu Qatada and how the poor mite could be treated in Jordan, Italy ignores a court order and deports a convicted terrorist. And now the European Court of Human Rights has said they can’t make Italy reverse the deportation. Who is right and wrong? Only you can decide but should Italy and Britain be allowed to decide who lives in their country and who does not? You betcha.
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