US Dollar once again the safe haven currency as Eurozone woes mount. FX report Jan 16By james tweed • Jan 16th, 2012 • Category: Currency
Significant items this week:
Tues 17th Jan UK – CPI/RPI – Inflation figures should be lowering as the VAT hike of last year falls out of the reporting period.
EU – German economic sentiment report.
Wed 18th Jan UK – December unemployment figures
Thurs 19th Jan US – CPI
Friday 20th Jan UK – Retails sales for December
EU – German industrial production
Not a very data packed week – all eyes will be on Eurozone and Market responses to downgrades, Government bond sales and central bank comments.
Thank you for downloading this foreign exchange market report podcast from Coracle Online and Crossbar fx. This podcast is for January 16th.
The US Dollar has once again become seen as the safe haven currency as the Euro weakened following the news that one of the ratings agencies had downgraded 9 members of the Eurozone’s credit ratings, chief amongst them being France. The EURO USD rate is now at a 16 month low, and it’s not expected to stop there. Recent bond auctions from Italy and Spain underwhelmed investors and with more to come from Greece and indeed France it’s difficult to see the trend stopping. The big debate in the market is whether Greece can avoid default – it has 2 auctions in the next 3 months – if neither is successful they will default, unless of course the ECB comes to the rescue.
The ECB held rates at 1% last week, which wasn’t seen as being very supportive of the Euro. The markets had a expected a cut to help stimulate exports. Risk is back off the table and with today a US holiday today, the markets are awaiting their response to the weekends news from Europe. There was a surprise increase in French Industrial output figures for November but this doesn’t appear to be able to boost the Euro either. It’s all beginning to look like the stars are aligning for one of the Eurozone members to default…
Elsewhere there was more news of slowing consumerism as China export figures for December to Europe and the US fell more than expected. Not even Christmas managed to boost retail figures either side of the pond.
Here in the UK our trade deficit rose more than expected, to £8.64 billion, as a result of a slowing of exports to Europe. The fall was 1.5%. Some big high street retail firms have reported poor numbers for the festive season and you only need to walk down the high street to see the sales seem to be a little more than we usually expect in January. The Bank of England held rates at 0.5% and have not introduced any more QE, but the statement hints that this is still a possibility. It looks set to be a bumpy ride for the next few months.