The Coracle Currency podcast for May 22…By james tweed • May 22nd, 2012 • Category: Currency
Significant items this week:
Tues 22nd May UK – CPI, public Sector borrowing
Wed 23rd May UK – Minutes of the last MPC meeting
Thurs 24th May UK – GDP Q1 second cut, April Retail sales
US – Durable goods orders
Fri 25th May EU – German consumer confidence
Thank you for downloading the foreign exchange market report podcast for May 21st from Coracle Online and Crossbar fx.
Last week global contagion concerns gripped the markets, driving equities lower, commodity prices down (except gold) and weakening the Euro. The main concerns surround what the implications are of a possible Greek exit from the Eurozone. The ramifications are so dire that the demand for highly rated government bonds and the USD increased as the week passed. Another week of political paralysis in Greece is weighing heavily on investors’ minds; with banks at the heart of the matter as the financial stability of several large banks came into question. Substantial withdrawals from Greek banks, coupled with undisclosed Spanish, Italian and indeed many other banks exposure to Greek debt, meant equities tumbled and fears for liquidity resurfaced. The Greeks are looking to resolve the political deadlock in mid June. Failure to do so and bring Greece back from the abyss look slim. Even if bank runs can be avoided, and a new pro-bail out government is formed, the bail out to date will undoubtedly have to be revisited. As the Greek barber said to his German client on seeing him again so soon “Another haircut sir?
The USD has been benefitting from the flight to quality, reaching highs against the Euro and Sterling, as has Gold which rebounded from its recent sell off.
The Bank of England held rates at 0.5% last week and didn’t increase their monetary easing programme. UK unemployment fell by 45,000 which was positive, but overall UK GDP growth for this year has been downgraded from 1.2% to 0.8%. In a statistic that has a 0.3% fudge factor that could mean we hardly drift out of recession this year. European woes are not helping despite the nation’s best efforts to lift spirits and embrace the Queens Jubilee and the Olympics. Wealth preservation, minimising debt exposure and hoping the summer improves and sales with it, is occupying most business owners at present. We all want the Eurozone to survive, and normality to resume, but have the gut wrenching feeling that the first domino is about to fall.