FX Market Overview

Yesterday the markets were buoyed by the pledge from France and Germany to provide a blueprint by month end for the recapitalising ( nationalising) of European Banks ahead of any Greek default. Additionally support from local governments to Dexia added the increased risk appetite as stock indices rallied. Dexia was not the only ailing lender to go cap in hand to the authorities, with both Danish and Greek governments having to bail out large banks in order to avoid further collapses. I can’t help but think that there has been very little detail regarding the so called plan and that investors will be looking for specifics very soon and that perhaps the risk rally is a tad overdone. After all, policymakers have had over a year to solve the debt crisis, I find it hard to believe that they will be able to magic up a solution in 3 to 4 weeks!
In other news, closer to home the Royal Institute of Chartered Surveyors reported that house prices were unchanged last month; citing weak consumer sentiment and uncertainty about the economic outlook causing potential sellers to defer putting their houses on the market. The gauge from RICS remained at -23. In a separate report from the British Retail Consortium retail sales were surprisingly upbeat at +0.3% compared to a year earlier although the report did suggest that underlying economic conditions remain weak.
Data from the UK this morning was again negative with manufacturing production falling by 0.3% in August, the third month in a row; reflecting the slowing growth in the global economy and denting hopes that it will stoke faltering UK growth. That was also reflected in the British Chamber of Commerce decision to lower their growth forecast. in the words of Private J Frazer, "We're all doomed".
With very little due to be released today on the macro front attention will no doubt turn to Slovakia which is today voting on strengthening the European Financial Stability Facility. Slovakia’s politicians have been warning for weeks that they could vote down the package, or insist on conditions that could wreck it. Coalition partners have been unable to agree a compromise deal therefore the government may have to rely on opposition support to push the deal through which is , at present , weighing on market sentiment. The EFSF plan has to be ratified by all 17 member states so a Slovakian veto would be very damaging to Merkel and Sarkozy's plans.

And finally, in news that will stir the hearts of all of the women in your life, a Swedish study has concluded that people who eat chocolate have fewer strokes. I don't think I need to add anything to that do I. Have a great day. Off to the sweet shop are you?