13:30pm US May Producer price index 14:15pm US May Industrial production 14:15pm US May Capacity utilisation
Tuesday, 16 June 2009
Today's Highlights
13:30pm US May Producer price index 14:15pm US May Industrial production 14:15pm US May Capacity utilisation
FX Market Overview
Yesterday a sell off in global stock markets provided brief support to the US dollar which has had a hard time in recent months. Much of this move has been unwound this morning though and the US dollar has been unceremoniously dumped losing 2 1/2 cents against the proud pound. Japan’s finance minister failed to prevent the rout by reasserting Japan's commitment to the US dollar stating their confidence in the dollar “isn’t shaken at all”. Their confidence in the dollar maybe stirred but this was another important signal that the second biggest holder of US treasuries isn’t planning to sell out of their $1 trillion US government bonds.
The UK consumer price index this morning revealed inflation had jumped twice market expectations from +0.3% in April to +0.6% in May. This brings annual UK inflation down to 2.2%, still above the 2% target but well above the Bank of England forecast of 1% later this year. A little inflation is a good thing, much more desirable than deflation as it shows some demand exists in an otherwise bleak environment. The pound has rebounded strongly as traders following interest rate expectations will start bringing forward their forecasts for Bank of England rate hikes. On the other hand a resurgence in inflation pressures could spell disaster for the UK economy which needs very low stimulatory interest rates for another year or so to ensure we get out of this recession.
Optimistic market hawks are starting to stress over the exit strategies that central banks will have to adopt when they make their impending “about turns” and start raising interest rates to combat inflation. Personally I feel this concern is premature as unemployment is nowhere near its peak and the economy has not yet shown evidence of a recovery. There is a big difference between a slowing down in the pace of decline and an actual recovery. This is like a family worrying about building a loft coversion for a baby which may be born in the next few years, while rain pours through a large hole in the roof.
The Euro has been struggling of late as data continues to disappoint to the downside. Several stories are circulating about the dire state of European banks and the fragility of Latvia. This morning the Euro got a welcome boost however after the June Germany ZEW economic expectations index rocketed to 44.8 from 31.1 in May. This was the eighth consecutive rise and was enough to temper the rise in GBPEUR which has had a stellar week as the Polyfilla covering the cracks in the Eurozone economy starts raining down.
Later this afternoon US May producer price index will bring inflation back to the forefront of trader’s minds as we get to see how much the price of raw materials and fuel has raised the cost of output to producers in the US.
Nature works in mysterious ways. A Chinese family borrowed a pet cat to catch a mouse, only for the cat and mouse to become best friends. Mr Li, of Changchun, asked his neighbour to starve the cat overnight. The cat caught the mouse but then let it go. "Now they are friends and the cat even cuddles up with the mouse to sleep,'' said an annoyed Mr Li.
The UK consumer price index this morning revealed inflation had jumped twice market expectations from +0.3% in April to +0.6% in May. This brings annual UK inflation down to 2.2%, still above the 2% target but well above the Bank of England forecast of 1% later this year. A little inflation is a good thing, much more desirable than deflation as it shows some demand exists in an otherwise bleak environment. The pound has rebounded strongly as traders following interest rate expectations will start bringing forward their forecasts for Bank of England rate hikes. On the other hand a resurgence in inflation pressures could spell disaster for the UK economy which needs very low stimulatory interest rates for another year or so to ensure we get out of this recession.
Optimistic market hawks are starting to stress over the exit strategies that central banks will have to adopt when they make their impending “about turns” and start raising interest rates to combat inflation. Personally I feel this concern is premature as unemployment is nowhere near its peak and the economy has not yet shown evidence of a recovery. There is a big difference between a slowing down in the pace of decline and an actual recovery. This is like a family worrying about building a loft coversion for a baby which may be born in the next few years, while rain pours through a large hole in the roof.
The Euro has been struggling of late as data continues to disappoint to the downside. Several stories are circulating about the dire state of European banks and the fragility of Latvia. This morning the Euro got a welcome boost however after the June Germany ZEW economic expectations index rocketed to 44.8 from 31.1 in May. This was the eighth consecutive rise and was enough to temper the rise in GBPEUR which has had a stellar week as the Polyfilla covering the cracks in the Eurozone economy starts raining down.
Later this afternoon US May producer price index will bring inflation back to the forefront of trader’s minds as we get to see how much the price of raw materials and fuel has raised the cost of output to producers in the US.
Nature works in mysterious ways. A Chinese family borrowed a pet cat to catch a mouse, only for the cat and mouse to become best friends. Mr Li, of Changchun, asked his neighbour to starve the cat overnight. The cat caught the mouse but then let it go. "Now they are friends and the cat even cuddles up with the mouse to sleep,'' said an annoyed Mr Li.
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