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Will the ECB cut rates this week? Currency report Sept 5

By • Sep 6th, 2011 • Category: Currency

The Coracle Online Currency podcast for Sept 5, 2011 in association with Crossbar fx

Significant items this week:

Tues 6th September UK – Retail Sales

Wed 7th September UK – Industrial production

Thurs 8th September UK – BOE MPC Interest rate decision
EU – ECB interest rate decision, German Trade Balance
US – Trade Balance, Initial Jobless claims

Fri 9th September UK – Trade Balance
EU – German CPI

Thank you for downloading the foreign exchange market report podcast from Coracle Online and Crossbar fx for September 5th 2011.

The summer has been a depressing time for the world’s financial markets, as a series of increasingly worrying data releases re-inforce concerns that the global economy could be lurching back towards recession. The worries peaked on Friday as the US employment report showed zero growth in non farm payrolls for August. July’s figure was revised downwards. To make matters worse, these factors were combined with a collapse in average weekly earnings. The jobs figure hasn’t been so bad since 1945. All of this bad news actually strengthened the USD however as riskier assets were being dumped in the equity markets and funds were repatriated, mostly to the USD.

The Euro is now weakening as manufacturing surveys for the region came in weaker than expected, revealing that the slowdown in activity has spread from the periphery of the Eurozone to its core – Germany. Figures show that German manufacturing grew at its slowest pace in 2 years. All this is raising speculation the ECB may loosen its hawkish stance on interest rates and cut interest rates later this week. Its a long shot, the general opinion is they won’t… yet.. but, they certainly need to get a grip. The EU debt market clam was only just maintained following intervention from the ECB who spent 15 billion Euros supporting Italian and Spanish bond sales. Whatever their members do the costs escalate as they procrastinate. September will be a fraught time for the Euro as the members’ leaders’ try to come up with a Euro bond that appeals to all members.

In the UK manufacturing data showed it has shrunk at its fastest rate for 2 years, as export orders plummeted. PMI actually fell below 50, which signifies contractions and is the lowest it has been for 26 months. The Bank Of England meets this week and is expected to keep rates on hold. We also expect them to remind us that we are not quite double dipping and that if we do, it’s the Eurozone’s fault and there is nothing we can do about it.

Thanks for listening