I’m back in the office today having managed to get here through the snow and ice. Central London is dry and snow free but blisteringly cold. Having read through the newswires, it is pretty clear that Friday’s data was pretty well in line with previous releases. The EU trade surplus grew as retail imports shrank faster than exports which tells you a lot about the fragility of EU consumer sentiment. However, the German IFO institute’s business sentiment index rose for the 9th straight month in December and the Eurozone current account deficit narrowed so there are some good news stories from Europe and that probably explains the unflustered response of Euro traders.
However, the fact that one credit ratings agency downgraded Greece’s credit rating last week and two more are rumoured to be ready to follow suit this week may well rock the Euro’s boat in the days ahead so be ready to take advantage of any spikes attributable to rumour rather than fact because these are most likely to create the largest moves.
The UK data was equally equivocal with the Bank of England’s financial stability report stating that the bank feels it has steered the UK through the worst of the recession but that there is a long and bumpy ride ahead for Britain before we reach the nirvana of growth, falling unemployment and sensible inflation. UK share prices; especially banking sector shares, were weaker on Friday as market chatter turned to the amount of debt still requiring refinancing amongst UK banks. £1 trillion was mentioned as the headline number and that, as you are probably aware, is quite a lot of money. Perhaps this week’s release of the minutes from the last Bank of England meeting will shine more light on that.
The other news doing the rounds is the fact that the three recent Australian interest rate hikes were against the advice of the International Monetary Fund. This isn’t exactly news as we all knew the IMF wanted interest rates to stay low for a considerable time but we also knew that many analysts thought the Reserve Bank of Australia n was being too pre-emptive in their recent plans and that may come back to bite them in the bottoms in the months ahead if the global economy doesn’t pick up.
This week’s news is less plentiful than last but there are a few important bits. Today’s diary is almost non-existent but the biggie; the US economic growth data will be realised tomorrow. Gross Domestic Product was estimated to have grown by 2.8% in Quarter 3 compared to Q2 but there are some forecasts suggesting this could be revised as high as 3.0% when the final number is released and that may well give an already strong US Dollar a solid boost. We will also get a smattering of UK data including mortgage approvals and consumer credit numbers so this is likely to be a volatile week anyway. Add in the fact that many traders will be balancing their books before the festivities and the long break and the scene is set for a snowy feast of trading activity.
So have a great week, I hope your travel plans are not too badly affected by the weather conditions. And I hear that Lapland has seen a sharp upturn in manufacturing output in the elf sector so that’s good.
But can I ask for a show of hands from anyone who is surprised that the G20 conference in Copenhagen didn’t reach a decisive conclusion. Just as I thought... no one except Ed Milliband. It was always going to be a damp squib wasn’t it; thousands of delegates from 193 countries and thousands of members of non government organisations burned massive amounts of jet fuel to fly into Copenhagen bringing with them millions of ulterior motives and vested interests and then set about discussing immense sums of money available for grants, research and ‘green’ policies. Having reached no kind of agreement at all and only ‘noting’ a minor agreement between 5 countries, they all flew back home to tell us all how to save the planet because ‘the clock is ticking’. I’m surprised they didn’t just shred the emails that questioned the outcome. That seems to be the standard operating procedure on climate change.
As we have always thought, politicians couldn’t organise a snowball fight in Siberia.
Foreign Exchange Market Commentary
