The week in foreign exchange…By james tweed • Nov 22nd, 2011 • Category: Currency
Significant items this week:
Tues 22nd Nov UK – Public Sector borrowing
US – Q3 GDP
Wed 23rd Nov US – Durable Goods orders
Thursday 24th Nov US – Bank Holiday – Thanks giving
Thank you for downloading the foreign exchange market report podcast from Coracle Online and Crossbar fx for November 21st 2011
It’s Thanksgiving this Thursday in the US, and the economic data releases this week are suspected to support the growing cautious optimism about the the US economy and its equity markets. The USD is strengthening as a safe haven while the Eurozone and its banks try to come to terms with the spreading crisis amongst a growing number of its members. Last week the debt crisis spread from the periphery to the core. Spanish and Italian debt yields surged again as their bonds were sold off. They touched the 7% mark which is a level at which the debt is unsustainable for a flat lining economy. French and Austrian yields also jumped. When compared to German paper, the ten year spread has never ever been higher, which gives you some idea on how risky the EMU members are considered to be compared to Germany. Macro economic data for the Eurozone was poor as industrial output fell by the most in 2 years in Sept. Without growth there is no chance of indebted economies getting borrowings under control. But growth is not on the horizon as long as the credit squeeze in the interbank market is restricted over worries of sovereign debt exposure, which in turn hampers lending. It’s too early to say if the Euro is in its “death spiral” , but when Portugal, Ireland and Greece reached yield levels of 7% they needed bailing out. Spain and France are too big to apply the same solution to if they head the same way.
In the UK CPI and RPI dropped to 5% and 5.4% respectively. Retail sales grew 0.6% in October, but Consumer confidence is now down to its lowest level since May 2004. Unemployment is rising. Youth unemployment is now at an unprecedented level of over 1 million. The overall total unemployment figure is now 8.3%, or 2.62 million people and that’s the highest since 1994. 3 million is the expected number of unemployed by next Spring. Last week also saw UK growth forecasts being lowered by the Chairman of the Bank of England to broadly flat over the next 2 to 3 quarters, resulting in an annual rate of 1% for 2011 and 2012.
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