UK growth better than forecast _ Sterling declines US growth improves - US Dollar does likewise Australasian Data very strong
Monday, 1 March 2010
Today's Highlights
UK growth better than forecast _ Sterling declines US growth improves - US Dollar does likewise Australasian Data very strong
FX Market Overview
The major highlight of last week was the long awaited 2nd revision of the Quarter 4 UK economic growth data. After the unconvincing 0.1 percent growth shown in the first estimate, we were all on tenterhooks as we awaited the updated numbers with all the data sets included. Most had anticipated, as I did, that the figure would be a poor one and that we would discover we were not as yet out of recession. However, they and I were very surprised to learn that, at 0.3% quarter on quarter growth, the UK was actually emerging from recession at a greater pace than previously envisaged. You could be forgiven for expecting a Sterling rally on the back of that good news but you would be wrong. Unfortunately, the Year on year growth figure was revised down to a minus 3.3 percent as it was announced that previous q/q figures were miscalculated and that put the skids under sterling which fell like a 40 stone ski jumper. It looks like the question on everyone’s lips was that if the previous data could not be trusted why would this be any different?
Traders and investors are very wary of Sterling for all manner of reasons; will the bank of England add to its asset purchase scheme to inject further cash into the economy? Will we get a hung parliament; even David Cameron thinks this elecetion will be a close run thing. Will This GDP growth data set be revised downward in a couple of months time? IS there any feasible way to cut the Uk debt levels without first incurring the wrath of the credit ratings agencies? Will Wayne Bridge ever shake John Terry’s hand? Well that last one isn’t important to the Pound but it does seem important to the wider public. We get a bank of England decision this week which may answer some of those questions - nt the last one of course.
However, whilst mixed UK data weakened the Pound, the US economic growth data was also in the news and that was also revised to the upside on the q/q figures but without the downward revision to the annualised numbers. The US Dollar strengthened across the Board and Sterling hit a fresh 9 month low against the USD. There is a fair amount of US data due this week which may trouble the USD. The most important is this Friday’s employment report which we are all hoping will be better than last week’s weekly jobless data. If it is then there are few reasons not to buy the US Dollar but, perversely, that may weaken the USD as it instils confidence in investors who are emboldened enough to sell the safe haven US and buy into higher yielding assets like the Australian and New Zealand Dollars as well as shares in overseas markets.
On this side of the Atlantic, the Greece story trundles along in the background. The latest is that the German government is considering using a state owned bank to channel funds to support Greece and that Greece is very worries that its €5 billion cash call due next week will be under-subscribed. That would be a disaster and prompt an acceleration of the EU involvement in the attempted resolution of Greece’s problems which were so graphically highlighted by Greek Prime Minister Papandreou in the Greek parliament last well. Meanwhile the Euro remains weak against the likes of the US Dollar and Japanese Yen but it is certainly not as weak as the Pound and that tells you a lot about how poorly Sterling is perceived across the markets.
Overnight news that the gross operating profits of Australian Companies grew by 2.2 percent in Quarter 4 -nearly 6 times faster than forecast - was, understandably met with Aussie Dollar buying. That buying frenzy was helped by a surge in copper prices prompted by supply disruption caused by the Chilean earthquake and by the expectation that tomorrow’s Reaerve Bank of Australia meeting will result in a 25 basis point interest rate hike.
And this morning’s news that New Zealand export commodity prices jumped 3.8% in February, the 12th straight month of rises, was met with NZ Dollar buying, as you might have expected.. The gap between eastern economic growth and western economic stagnation looks set to remain in place for some time to come.
And so to today; the major news items for Monday are UK money supply data, Canadian economic growth numbers, US personal income and expenditure data and the US institute of supply manager’s index. All are important, all could move the market and all will be watched by your truly so you don’t have to, you lucky people. Paint drying has a certain scintillation when market data is the alternative viewing option.
And finally, the people of Derby have a great sense of humour. When the council asked for suggestions for the naming of a section of the ring road, 9 out of 10 of the 27,000 respondents requested Lara Croft Way, and so that shall be the name. I wonder if these are the ones who nearly got Jedi Knight registered as a religion in the last census and I wonder if Angelina Jolie will be invited to open the road.
Traders and investors are very wary of Sterling for all manner of reasons; will the bank of England add to its asset purchase scheme to inject further cash into the economy? Will we get a hung parliament; even David Cameron thinks this elecetion will be a close run thing. Will This GDP growth data set be revised downward in a couple of months time? IS there any feasible way to cut the Uk debt levels without first incurring the wrath of the credit ratings agencies? Will Wayne Bridge ever shake John Terry’s hand? Well that last one isn’t important to the Pound but it does seem important to the wider public. We get a bank of England decision this week which may answer some of those questions - nt the last one of course.
However, whilst mixed UK data weakened the Pound, the US economic growth data was also in the news and that was also revised to the upside on the q/q figures but without the downward revision to the annualised numbers. The US Dollar strengthened across the Board and Sterling hit a fresh 9 month low against the USD. There is a fair amount of US data due this week which may trouble the USD. The most important is this Friday’s employment report which we are all hoping will be better than last week’s weekly jobless data. If it is then there are few reasons not to buy the US Dollar but, perversely, that may weaken the USD as it instils confidence in investors who are emboldened enough to sell the safe haven US and buy into higher yielding assets like the Australian and New Zealand Dollars as well as shares in overseas markets.
On this side of the Atlantic, the Greece story trundles along in the background. The latest is that the German government is considering using a state owned bank to channel funds to support Greece and that Greece is very worries that its €5 billion cash call due next week will be under-subscribed. That would be a disaster and prompt an acceleration of the EU involvement in the attempted resolution of Greece’s problems which were so graphically highlighted by Greek Prime Minister Papandreou in the Greek parliament last well. Meanwhile the Euro remains weak against the likes of the US Dollar and Japanese Yen but it is certainly not as weak as the Pound and that tells you a lot about how poorly Sterling is perceived across the markets.
Overnight news that the gross operating profits of Australian Companies grew by 2.2 percent in Quarter 4 -nearly 6 times faster than forecast - was, understandably met with Aussie Dollar buying. That buying frenzy was helped by a surge in copper prices prompted by supply disruption caused by the Chilean earthquake and by the expectation that tomorrow’s Reaerve Bank of Australia meeting will result in a 25 basis point interest rate hike.
And this morning’s news that New Zealand export commodity prices jumped 3.8% in February, the 12th straight month of rises, was met with NZ Dollar buying, as you might have expected.. The gap between eastern economic growth and western economic stagnation looks set to remain in place for some time to come.
And so to today; the major news items for Monday are UK money supply data, Canadian economic growth numbers, US personal income and expenditure data and the US institute of supply manager’s index. All are important, all could move the market and all will be watched by your truly so you don’t have to, you lucky people. Paint drying has a certain scintillation when market data is the alternative viewing option.
And finally, the people of Derby have a great sense of humour. When the council asked for suggestions for the naming of a section of the ring road, 9 out of 10 of the 27,000 respondents requested Lara Croft Way, and so that shall be the name. I wonder if these are the ones who nearly got Jedi Knight registered as a religion in the last census and I wonder if Angelina Jolie will be invited to open the road.
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