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Politics is driving the currency markets…

By • Nov 15th, 2011 • Category: Currency

The Coracle Online Currency podcast for Nov 14, 2011 in association with Crossbar fx

Significant items this week:

Tues 15th Nov UK – Oct CPI/RPI
EU – Germany GDP Q3
US – Retail sales, NY Fed Manufacturing

Wed 16th Nov UK – Unemployment
US – CPI, Industrial production, Long Term investment inflows.

Thurs 17th Nov UK – Retail sales
US – Housing permits/Starts

TThank you for downloading the foreign exchange market report podcast from Coracle Online and Crossbar fx for November 14th 2011

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Last week the markets were driven by political developments in Europe as at first the Euro weakened amid uncertainty over who would succeed Berlusconi after he agreed to step down. As we know, he has now gone and the Italian Parliament has agreed to a new round of cuts. Despite the Euro’s comeback at the end of last week, many people are still bearish about the outlook for the currency; arguing that a temporary resolution of the regions’ political woes would not necessarily address the economic fundamentals.

Sterling and the US Dollar saw some safe haven buying as the Eurozone tried to decide on a definitive plan to deal with the escalating issues. Greece is still un-resolved, and Portugal and Spain are waiting for their turn on the centre stage. This show is sadly set to run and run.

In the US the jobless claims fell by 10,000 and the US trade deficit narrowed. Slowly, slowly, the US is dragging itself from the abyss, while Europe slips into it. Italy needs 300 billion Euros to furnish its debt obligations next year which is something they haven’t got. To put this into perspective, remember that the European financial stability facility struggled to raise 3 billion from its latest Bond issue last week. The ECB must be warming up the printing presses to print more money…

Here in the UK we posted a record Trade deficit for Sept of £9.8bn, and all the forecasters are suggesting we shall have a flat 2012 as far as growth is concerned. We cant really fall into recession as we never really left it in the first place! The CBI has cut our growth estimates to 0.9% for 2011 and 1.2% for 2012, and suggests unemployment will rise to 8.5% before things improve. That’s 3.5m, a figure first muted a year ago. Currently its 3.1m, so another 500,000 before the slow turnaround begins. This is of course all very dependent on the Eurozone and how they tackle their issues and what economic stimuli bear fruit. As our largest trading partner – how consumers fair there effects how much trade occurs and hence whether there are jobs available here to satisfy their demand.

Thanks for listening