Turmoil in Euroland and associated Currency market news. May 8By james tweed • May 8th, 2012 • Category: Currency
Significant items this week:
Wednesday 9th May UK – Retails sales
EU – German Trade Balance
Thursday 10th May China – Trade Balance
Japan – Trade Balance
Australia – Unemployment
UK – Trade Balance, Industrial production, MPC interest rate meeting, GDP estimate
US – Trade Balance
Friday 11th May China – CPI, Industrial production, retail sales
EU – German CPI
US – Consumer sentiment
Thank you for downloading the foreign exchange market report podcast for May 8th from Coracle Online and Crossbar fx.
The economic data announcements from last week were mostly on the downside, but all that seemed to be forgotten by the time the weekend was over and the dust had settled on Monday’s bank holiday here in the UK. Markets reacted to the weekends news that France has a new President, – Francois Hollande, and the Greek coalition government can no longer agree to agree. US Non-farm payrolls came in lower than expected, which the market ignored as it’s only one months’ figures, which seems silly to react to in isolation.. instead all the action was in Euro land, and further afield. The Greeks can’t form a majority government and agree to the deal they struck with the IMF/ECB – so the logic goes they will not be lent any more money. This means they would go bust and have no choice but to default on the remaining debt obligations, which are mostly to the IMF and EMU. Then they’d have to resort to printing their own money (in other words, they’d leave the EU) The fear is others may be tempted to follow suit. In France the new president has the problem of actually now having to deliver on his rhetoric which saw him elected based on a re-negotiation of the austerity measures drawn up by Germany. That is something that the EMU and Germany say is not negotiable. In a nutshell the perfect storm brewing in Europe just got more perfect.
Elsewhere, a surprise half a percent interest rate cut in Australia confirms that the economy there is slowing because of an implied falling off of business from China.
Uncertainty is the enemy and that has seen the Euro weaken and the USD and Sterling benefit. Risk appetites seem to be back in the driving seat and a period of volatility will ensue until the market has made up its mind what the likely outcomes might be and positioned themselves accordingly. Despite sterling now trading up a cent against the Euro, the forthcoming weeks economic data may keep it back from getting to the 1.25 rate that so many think is the least the market should be trading at.