Fragility of the global economy in the spotlight again. Currency report Mar 26By james tweed • Mar 26th, 2012 • Category: Currency
Tues 27th March UK – Q4 GDP
Wed 28th March EU – German CPI, Retail sales
US – Durable goods orders
Thurs 29th March EU – German unemployment
US – Q4 GDP
Friday 30th March US – Personal income, Chicago PMI, Consumer sentiment
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The fragility of the global economy was once again in the spotlight last week. Economic data from the Eurozone and China pointed towards less growth than expected and worries about rising energy prices: oil in particular, have ensured that no nation is yet able to breathe a sigh of relief. The IEA, the International Energy Agency, predicts that if crude oil remains at these prices, the demand from leading economies will tip them back into recession, with the EU being particularly vulnerable. The oil price is now taking over from the sovereign debt crisis as the biggest hurdle out there. China’s slowing down has meant that many commodity linked currencies, for example the Australian dollar, have weakened as the demand for raw materials is flattening and their economy remains reliant on Chinese trade. Ireland slipped back into recession last week; Spain and Portugal are looking fragile with Spain missing their austerity targets by some margin. But French business confidence is high… for now.
Here in the UK inflation fell to 3.4%, and RPI to 3.7%. Both are now back to November 2010 levels. On the downside the UK borrowed twice as much as expected in Feb. £15.2 billion against £8 billion in February last year. Despite this the overall borrowing for the year looks set to beat the target of £127 billion. We sit with only March to come and the total so far is £110 billion. Retails sales were down in February by 0.8% versus January and unlike France, our confidence fell in February. It seems there’s still plenty of doom and gloom around. The budget announcement did little to bring a cheer to the economy as it gave with one hand and took with the other. You may feel richer if you are in a certain tax bracket, but whatever you gained will almost certainly be consumed by higher energy prices… so there really aren’t many people who are going to feel better off.