FX Market Overview

I remain confused by all the various and disparate reports over the credit ratings agencies view of the UK. Not being an expert in the nuances of credit-ratings-agencies-speak I tend to rely on the reports from those who claim to be fluent in the miniscule changes in this arcane language; a language where the moving of a comma will change the whole mood of an entire report. However yesterday brought a sequence of reports that Moody’s was warning the UK and US that their ‘AAA’ ratings were at risk and today brings a report saying these ratings levels are secure because both countries have the means to extricate themselves from their respective monstrous debt levels. However, they do warn that the US and UK are paying more in interest than almost anywhere else and that will be a drag on what governments can do to stimulate their domestic economies. The US Dollar strengthened and the Pound weakened as is the way of the market these days.
The US Federal Reserve meets today and should announce, at 18:15 GMT that they are keeping their base rate at the current 0.0 to 0.25 percent for an extended period but I can’ see that having any effect on the US Dollar because it is so well forecast. Sterling’s weakness will have been hastened by the comments of BOE member Kate Barker who sees the UK economy slipping back in quarter 1 after just about limping back into growth numbers during the last three months of 2009. The end of the VAT cut and poor weather are cited but we were all a bit nervous that the 0.3 percent growth in Q4 2009 was a blip. Ms Barker feels q1 will show a small decline but doesn’t see two quarters of contraction which would constitute a 2nd recession; the infamous ‘double dip’ tat you hear so much about.
The newspapers are full of the same story today; one headline summed it up in the Telegraph “EU berates Britain for disappointing budget plan”. Apparently the EU feels the Chancellor is not being bold enough or hasty enough in tackling the depth of the UK budget deficit. Now the EU can bleat as long as it likes but Alistair Darling doesn’t need t listen as they have no control over the UK; Britain not being a member of the Eurozone and all that but shadow chancellor, George Osborne will be rubbing his hands with glee as this is precisely what he has been saying in recent speeches.
The overnight release of the minutes from the last Reserve Bank of Australia meeting was interesting. The bank raised its base interest rate by 0.25 percent for the 4th consecutive time but seems less set on further hikes. One line from the minutes was taken as the word of caution that stopped any assumption of further hikes; the RBA warned that further problems in Europe could cause further market turmoil which would have repercussions for Australia. The Aussie Dollar failed to make any further gains on the minutes and that lack of progress is really almost entirely down to that one warning. The bond markets are now pricing no change of interest rates in Australia during April.
The first item on today’s agenda will be the economic sentiment survey carried out by the German ZEW institute. Yet another monthly decline is forecast and the fears over problems in Greece will almost certainly have weighed the minds of German respondents. That data is closely followed by the consumer price inflation number for the Eurozone. It’s a 2nd estimate and it should confirm the 0.9 percent reading that the flash estimate revealed. However these data will be overshadowed by the conclusion of the EU finance minsters’ meeting which everyone is hoping will bring some sort of clarity to the EU’s position towards Greece and a package of measures to support Greece as it boxes its way out of a very tight corner. If we are all happy with the result, Euro strength should ensue but woe betide the Euro is the EU ministers have fluffed it.
And finally, I need scoot off now because I want to track down a woman called Lareece Butler who lives in South Africa and ask her to choose 6 numbers between 1 and 49. This 26 year old sky diver plummeted 3,000 feet whilst tangled in her parachute which failed to open and survived. She did sustain some serious injuries but she is said to be in a stable condition in hospital. Now if someone with that kind of luck can’t choose 6 winning lottery numbers, who can.