Currency market review podcast from Coracle and Crossbar FX.By james tweed • Aug 8th, 2012 • Category: Currency
Significant items this week:
Tuesday 7th Aug UK – Industrial, Manufacturing production, NIESR GDP estimate
Wed 8th Aug UK – BOE Quarterly Inflation report
EU – German industrial production
Thurs 9th Aug China – CPI, Industrial production, Retails sales
EU – Monthly report
UK – Trade Balance
US – Trade Balance
Fri 10th Aug China – Trade Balance
UK – PPI
EU – German CPI
Thank you for downloading the foreign exchange market report podcast for August 7th from Coracle Online and Crossbar fx.
Last week the USD lost ground in the fx markets after economic data announcements showed that unemployment remained at a stubborn 8.3% despite better than expected Non-farm payrolls data showed 163,000 jobs were added in July. The data supports the view that the FOMC will not introduce any more QE in Sept, but will wait for the data to come through from August and perhaps September. The week was dominated by central bank meetings both in Europe and the US, and whether or not either the ECB or the FOMC would announce new easing measures. The FOMC negative response was assumed, but after much talk the ECB negative response was a surprise. Having told everyone that he would do whatever it takes to maintain the Euro, Draghi said the central bank “may consider” buying short term government debt again. Spain and Italy have 370 billion Euros to refinance in the next 12 months, and demand for their paper is dwindling – even at the current unsustainable rates. Spain and Italy are likely to remain in the EMU unless civil unrest or populist left, or right wing government force the issue. Both will ultimately swallow the austerity measures offered by Germany. Greece is likely to leave as withdrawal of more bailout funding and ECB credit lines mean they will need to print money to pay salaries and other government expenditure. When you can’t pay the police, doctors and nurses its only a short hop to anarchy and producing Drachma would avoid this. The rest of the EU (i.e, Germany) are no longer willing to write blank cheques, and offer open-ended bailouts. The EMU will survive but probably with a couple less members. The timing of this is the ‘don’t know’ that’s unsettling the markets.
The growth forecast for the UK has been cut by Moodys the ratings agency, and the MPC left rates unchanged and QE unaltered. Worldwide manufacturing is in a slump, with the UK’s being at a 3 year low, having fallen at its fastest rate for 3 years in July. August will be a slow month for the UK economy as everyone stays glued to the Olympics, and not worrying about the headache until afterwards!