Fears of ‘Grexit’ lead to weaker Euro. Currency report May 29By james tweed • May 29th, 2012 • Category: Currency
Significant items this week:
Tues 29th UK – CBI trade survey
EU – German CPI
US – Consumer confidence
Wed 30th UK – Mortgage approvals and Lending to individuals, Consumer confidence
EU – Consumer confidence
Thurs 31st EU – German retail sales, Unemployment
US – GDP, Continuing jobless claims
Fri 1st June China – PMI
EU – Unemployment rate, German PMI
US – Non Farm payrolls, Unemployment rate
Thank you for downloading the foreign exchange market report podcast for May 29th from Coracle Online and Crossbar fx.
Last week the markets were focussed on the Eurozone and the weakening of the Euro across the board as fears continue to grow about a possible Greek departure from the Eurozone. The downgrading of Spain’s banks by S&P didn’t help matters either. Spain has bailed out one of its largest banks, and the markets expect more to follow. The Greeks go to the polls on the 17th June and depending on who is elected, or what consortium takes over, will determine how much more of the medicine they are willing to take from the EU or will they pull the rip cord and bail out. The consequences of that are unclear: at the moment the rest of the EU is trying to work out how to avoid it because if it does happen, the rest of Europe and indeed further afield will have to pick up the pieces. It isn’t good news for anyone, not even the Greeks, if we see the Drachma return.
As the fears grow of “Grexit” there has been an ever increasing demand for safe havens, USD, German and UK bonds. Lack of any positive economic data from any of the major economies is also playing on investors minds. US jobless claims rose, and durable goods orders fell in April. China’s slowdown continues. The PMI came in at 48.7, the seventh successive reading below 50 that separates contraction from expansion. Many commodity based currencies, such as the South African Rand and Aussie Dollar are weakening in response as demand for raw materials from the Chinese decreases.
In the UK the economic picture was looking downbeat. Retail sales fell in April, after a positive March with the weather being wheeled out as the excuse. The negative news continued with the second cut of GDP for Q1coming in at a revised -0.3% from the first cut estimate of -0.2%. Either way, confirmation that the UK is still in recession. Inflation was 3% which was the lowest since Feb 2010. It’s going to be a bumpy ride, and businesses are sitting on their hands awaiting the outcome before committing to investment and looking at growth.