The slow motion debt crash in Europe continues… Currency report Oct 3By james tweed • Oct 4th, 2011 • Category: Currency
Significant items this week:
Tues 4th Oct US – Factory orders, ISM manufacturing
Wed 5th Oct UK – PMI services
EU – Retail sales for August
Thurs 6th Oct UK – BOE MPC meeting
EU – ECB meeting
Fri 7th Oct UK – Industrial production
US – Nonfarm payrolls
Thank you for downloading the foreign exchange market report podcast from Coracle Online and Crossbar fx for October 3rd 2011.
The third quarter of 2011 has been a turbulent period in the markets, and it doesn’t look like it will finish there. We end the period no closer to a long term solution to the European sovereign debt crisis, despite the German Parliament approving plans to expand the size and scope of the European financial stability facility last week. The Bank of England looks poised to introduce more Quantitative Easing and the US may also join them, having already pressed go on Operation Twist.
The global economic outlook is still a confusing one. German retails sales saw their biggest decline for 4 years; China manufacturing output fell for the 3rd month in a row, which was the worst streak since 2009; but US weekly jobless claims fell to their lowest level since April.
Equity markets have had their worst quarter with many funds now moving into cash as fears grow that company earnings for the 2nd half of this year will be dismal and this has meant a strengthening US Dollar as it is still seen has a safe haven. That’s a relative term… but you wouldn’t want to hold any other currency for the next few months now that central banks intervene if theirs become too strong, like the Swiss did. Get the wrong side of that deal and nobody will thank you.
So, we watch a slow motion debt crash in Europe, as the politicians stand around saying that we can’t let the Eurozone fail. Such uncertainty and yet more bad news about a Belgian bank over the weekend has seen the Euro weaken further.
In the UK, QE may be introduced this month, or more likely next. But no amount of money now , i.e., QE2, or in the future, QE3 , can force banks to lend, or consumers to borrow and spend. De-leveraging by the consumer means growth suffers and there is no quick cure. Consumers need to feel secure in their jobs and therefore their income streams before they decide it’s time to spend again on items which they can at present live without. Even the suppliers of things we all need, such as food, are seeing slowdowns.
Thanks for listening