FX Market Overview

Monday was a data no-man’s-land and the lack of stimulus meant exchange rates generally traded within recent ranges. There were though a couple of news stories that kept traders interested; oil hit $80 per barrel after a strike in a French Exxon refinery looked set to spread to other parts of France. Even if that does happen, it won’t cause a sizable drop in supply but it does have a knock on effect in terms of the price other refineries can charge. I a global market that is all it takes to slide prices skyward. It’ll certainly give UK forecourts yet another excuse to slip a few pennies on each litre.
And the Greek story continues with news that the International Monetary Fund has sent an envoy to Athens with those form the EU who are trying to formulate the way ahead for Greece. In an act of either brinksmanship or inefficiency, Greece failed to meet Fridays deadline to deliver a full package of austerity measures, designed to deal with their deficit domestically. Hope for a complete resolution to the Greek problems are still alive but a tad less optimistic right now. The Euro, understandably, hasn’t strengthened markedly from where it was on Friday.
Also within Europe, Germany’s second largest bank, Commerzbank reported a €1.6 billion loss in Q4 2009, well above expectations and enough to shake confidence a smidgeon. They cited the need to write down the value of assets as the main problem and whilst that is perhaps better than a straightforward trading loss, it does serve as a reminder that the recession still has a toll to take before we are fully out of the mire.
And speaking of mire, G Brown is still caught in a battle to clear his name after he was branded a bully by a charity head. She says she now feels like she is being bullied by the Prime Minister’s colleagues; where does it end? I laughed though when they fielded John Prescott to support the PM and tell us what a calm and relaxed chap G Brown is. To be fair, next to Prescott, anyone would look calm and relaxed but at least Mr Prescott didn’t punch anyone on air.
In contrast to yesterday’s dearth of data, today is pretty lively; we have already seen the German IFO institute’s business climate index which slipped to 95.2 from 95.8 a month earlier. That hasn’t unsettled the Euro particularly but this morning’s British Bankers Association mortgage lending data was always looking poor, especially after the recent housing and retail sales data has been very poor, and it didn’t disappoint. They reported a sharp fall in mortgage lending in January; just 35,000 mortgage approvals compared to 46,000 in December. We also had Mervyn King, the Governor of the Bank of England, speaking to a Treasury Select Committee this morning. It seems that whenever Mr King opens his mouth these days, the Pound slumps and guess what happened this morning. His comments that the UK recovery is fragile damaged the Pound (like we didn’t already know that) and his concern is that the Bank of England’s but he said he would be amazed if the UK credit rating was downgraded by the credit ratings agencies. I don’t think I am alone in being fearful that he is a tad too optimistic. Sterling is slipping as I write.
The rest of the morning brings the Confederation of British Industry distributive trades survey, a measure of the strength or weakness in the retail trades. It threatens to be quite poor, so don’t expect a bounce in Sterling just yet. This afternoon brings US housing market data and the US consumer confidence index, so we may well have a lively afternoon session.
And finally, according to a study run in America and Germany, 74 year olds are the happiest people alive. Perhaps they are just happy because they are still alive but the report suggests from the teenage years until the age of 40 our level of happiness declines. It remains roughly level from 40 until 46 and then starts to increase until peaking at 74. They should have questioned pre-teens as well because surely you can’t be any happier than when your only concern is whether your blue crayon will last until the end of the sky you are colouring in.