FX market update and data from Coracle and Crossbar fxBy james tweed • Feb 7th, 2012 • Category: Currency
Significant items this week:
Tues 7th Feb Australia – RBA interest rate decision
Wed 8th Feb UK – Retail sales
EMU – German Trade Balance
Thurs 9th Feb UK – BOE MPC Interest rate decision, Trade Balance, Industrial production
EMU – ECB meeting
Fri 10th Feb EMU – German CPI
US – Consumer confidence
Thank you for downloading the foreign exchange market report podcast from Coracle Online and Crossbar fx. This report is for February 6th
Investors bullish attitude towards the US economy was rewarded last week with the news that the US economy added 243,000 non-farm payroll jobs. This was more than was expected and brought the unemployment figure down to 8.3%, from 8.5% in January. This data strengthens the argument that there will be less of a chance of a further round of Quantitive Easing.
The Euro weakened across the board as the much anticipated Greek response to the latest round of bailout funds and the conditions attached are digested. Eurozone unemployment also hit a record high of 10.4%. It’s all about perception at the moment, and being able to overlook bad news. The perception is that the US economy is showing signs of recovery, and as we have seen the data backs this up, so investors deduce that demand will increase in the US economy. This in turn means that demand for raw materials will improve and this drives up commodity prices. In turn this is seen as good for many of the commodity based economies. And hence their currencies appreciate – for example the Australian Dollar and Canadian Dollar.
The worrying picture of the Eurozone is overlooked as recession is inbound and a default on the cards. But investors seem to be saying, oh well, look at the good news across the pond! The problem is that the US economy may well be ticking up, but demand may not grow as expected and a Eurozone recession or default will impact everyone as the zone is a large trading partner of the US. The upshot is that the equity bull run going on at present and the weakening USD may not last.
In the UK the speculation is that the Bank of England will introduce another tranche of Quantitive Easing on Thursday. Our bet is that they may wait to see how much the inflation figures come down. That figure won’t mean that inflation is falling right now of course because if you look at how the number is calculated, this month will see the VAT rise of 12 months ago drop out, so the resulting inflation figure will drop again and that means the Bank of England prediction is on track.
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