China is officially world's 2nd largest economy Eurozone inflation remains high US data dominates
Tuesday, 17 August 2010
Today's Highlights
China is officially world's 2nd largest economy Eurozone inflation remains high US data dominates
FX Market Overview
I am truly a cynic; I know it and I am sometimes slightly embarrassed about it but two politicians; one I expect it from and one I didn’t, have surprised me in their blatant cynicism in last few days. Tony Blair has agreed to donate the proceeds from his memoirs to charities working with injured soldiers. It is a clever move; makes some of the public feel he has a conscience and he no doubt still gets the proceeds from the speaking tour that will accompany the book. There are also undoubted tax advantages to the move but he faces a barrage of criticism as the man who contributed most to the number of injured soldiers in the first place.
But I was just plain surprised at how quickly Barack Obama went from telling everyone how “British Petroleum” had destroyed the Gulf of Mexico, causing the worst environmental disaster ever to taking his daughter swimming in the ‘devastated’ waters and telling everyone things were OK again. There is no doubt this was a tragic and dreadful accident but perhaps an apology to all the shareholders who lost money and Tony Hayward who lost his job are in order Mr President along with the return of some of BP's fines and contingency funds maybe.
It’s political expediency gone mad I tell you.
As for the financial markets, well The US Dollar is also the centre of attention as yet another piece of data pointed to a slowing US economy. The empire state manufacturing index did rise from its previous 5.08 to 7.10 but that was well below the consensus forecasts and not enough to help the US Dollar. There was a bit of profit talking on the USD’s recent strength but it remains a target for buyers who seek security rather than yield and looks set to remain strong even though the economy that underlies the Dollar is slowing with every passing day.
The Euro was a little better supported on Monday as a sequence of inflation reports from across the region pointed to higher costs. I am sure traders are not looking for interest rate hikes from the European Central Bank but the certainty that interest rates are not falling was enough to maintain a bit of strength in the Euro. Having said that, the Sterling - Euro exchange rate did manage to test the highest level in _____ months yesterday and remains elevated this morning.
UK inflation data, due for release today, could well show a slight decline from last month but will almost certainly remain above 3.0 percent, well above the Bank of England’s target of 2.0 percent. It leaves no room for the BOE to do anything very much; they can’t hike interest rates for fear of derailing the fragile recovery and they certainly can’t reduce interest rates or expand quantitative easing when their central remit is to maintain inflation at 2.0 percent; something they have been singularly unsuccessful at in the last couple of years. We will find out their take on this issue when we see the minutes from the last BOE monetary policy committee meeting tomorrow.
Before that though, we get a massive day of data. As well as the UK inflation figures, we get a business sentiment survey from the well respected German ZEW institute and then it is all about the US data. From consumer confidence to industrial production and from housing data to producer prices; it is all kicking off this afternoon. Volatility is assured on the heaviest day for data this week and if the numbers all come in as forecast, the US Dollar stands a very good chance of ending the day more strongly than it started.
That will mean weakness for, amongst others, the Australian Dollar. The release overnight of the minutes from the last Reserve Bank of Australia meeting revealed that they are quite sanguine about the decision to leave interest rates on hold for the 3rd month in a row. They spoke of the fact that the markets had settled down somewhat but warned of further volatility ahead. The Aussie Dollar barely twitched on the widely expected sentiment.
Today’s data diary also holds a couple of gems for the Canadian economy; we expect the inflow of funds to the Canadian government bond market to have slowed a little and manufacturing shipments to have slowed or even declines in the last month. That could give the Canadian Dollar the kick it needs to weaken it off and allow those who need to buy CAD to do so at reasonable levels.
Other currencies hitting the headlines include the Japanese Yen which weakened a little overnight amid rumours that the Bank of Japan was either intervening or hinting that it may do so in order to weaken the Yen and boost exporters’ prospects. With the Yen near a 15 year high against the US Dollar, no one is ignoring the potential for a sharp bout of intervention. The Swiss Franc is also in the news as the top rated safe haven currency. That is causing the Swiss National Bank no end of headaches; especially when they are too strapped for cash to intervene themselves.
Do you feel different this morning? We are in a new world order although you may have missed it in the news. Japan has slipped to third place in the list of the world’s largest economies after China stepped into second place behind America. It still surprises me that Japan is as large as it is anyway when you look at relative land mass but output has grown so fat in China in recent years while Japan has stagnated and that has flipped the placings.
And finally, the high price of gold is helping the South African Rand to maintain a degree of strength. It is unwanted strength though because it does hamper exports from South Africa of anything other than the highly valued gold, diamond and silver exports; all of which are seen as safe haven assets.
And very finally, at last the act of demanding money through a form of ‘habeas corpus’ of your car is outlawed. No longer will you be clamped and threatened until you hand over extortionate amounts of cash to burly thugs (unless they work for the council). My worry is over what these people will move on to; clamping bikes padlocked to railings, stealing the batteries out of mobility scooters and demanding money for their return, slashing the tyres of wheelchairs and charging to repair the punctures.....who knows what they are capable of.
But I was just plain surprised at how quickly Barack Obama went from telling everyone how “British Petroleum” had destroyed the Gulf of Mexico, causing the worst environmental disaster ever to taking his daughter swimming in the ‘devastated’ waters and telling everyone things were OK again. There is no doubt this was a tragic and dreadful accident but perhaps an apology to all the shareholders who lost money and Tony Hayward who lost his job are in order Mr President along with the return of some of BP's fines and contingency funds maybe.
It’s political expediency gone mad I tell you.
As for the financial markets, well The US Dollar is also the centre of attention as yet another piece of data pointed to a slowing US economy. The empire state manufacturing index did rise from its previous 5.08 to 7.10 but that was well below the consensus forecasts and not enough to help the US Dollar. There was a bit of profit talking on the USD’s recent strength but it remains a target for buyers who seek security rather than yield and looks set to remain strong even though the economy that underlies the Dollar is slowing with every passing day.
The Euro was a little better supported on Monday as a sequence of inflation reports from across the region pointed to higher costs. I am sure traders are not looking for interest rate hikes from the European Central Bank but the certainty that interest rates are not falling was enough to maintain a bit of strength in the Euro. Having said that, the Sterling - Euro exchange rate did manage to test the highest level in _____ months yesterday and remains elevated this morning.
UK inflation data, due for release today, could well show a slight decline from last month but will almost certainly remain above 3.0 percent, well above the Bank of England’s target of 2.0 percent. It leaves no room for the BOE to do anything very much; they can’t hike interest rates for fear of derailing the fragile recovery and they certainly can’t reduce interest rates or expand quantitative easing when their central remit is to maintain inflation at 2.0 percent; something they have been singularly unsuccessful at in the last couple of years. We will find out their take on this issue when we see the minutes from the last BOE monetary policy committee meeting tomorrow.
Before that though, we get a massive day of data. As well as the UK inflation figures, we get a business sentiment survey from the well respected German ZEW institute and then it is all about the US data. From consumer confidence to industrial production and from housing data to producer prices; it is all kicking off this afternoon. Volatility is assured on the heaviest day for data this week and if the numbers all come in as forecast, the US Dollar stands a very good chance of ending the day more strongly than it started.
That will mean weakness for, amongst others, the Australian Dollar. The release overnight of the minutes from the last Reserve Bank of Australia meeting revealed that they are quite sanguine about the decision to leave interest rates on hold for the 3rd month in a row. They spoke of the fact that the markets had settled down somewhat but warned of further volatility ahead. The Aussie Dollar barely twitched on the widely expected sentiment.
Today’s data diary also holds a couple of gems for the Canadian economy; we expect the inflow of funds to the Canadian government bond market to have slowed a little and manufacturing shipments to have slowed or even declines in the last month. That could give the Canadian Dollar the kick it needs to weaken it off and allow those who need to buy CAD to do so at reasonable levels.
Other currencies hitting the headlines include the Japanese Yen which weakened a little overnight amid rumours that the Bank of Japan was either intervening or hinting that it may do so in order to weaken the Yen and boost exporters’ prospects. With the Yen near a 15 year high against the US Dollar, no one is ignoring the potential for a sharp bout of intervention. The Swiss Franc is also in the news as the top rated safe haven currency. That is causing the Swiss National Bank no end of headaches; especially when they are too strapped for cash to intervene themselves.
Do you feel different this morning? We are in a new world order although you may have missed it in the news. Japan has slipped to third place in the list of the world’s largest economies after China stepped into second place behind America. It still surprises me that Japan is as large as it is anyway when you look at relative land mass but output has grown so fat in China in recent years while Japan has stagnated and that has flipped the placings.
And finally, the high price of gold is helping the South African Rand to maintain a degree of strength. It is unwanted strength though because it does hamper exports from South Africa of anything other than the highly valued gold, diamond and silver exports; all of which are seen as safe haven assets.
And very finally, at last the act of demanding money through a form of ‘habeas corpus’ of your car is outlawed. No longer will you be clamped and threatened until you hand over extortionate amounts of cash to burly thugs (unless they work for the council). My worry is over what these people will move on to; clamping bikes padlocked to railings, stealing the batteries out of mobility scooters and demanding money for their return, slashing the tyres of wheelchairs and charging to repair the punctures.....who knows what they are capable of.
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