As last week's parting shot I highlighted the UK 2nd quarter GDP figures out this week, and how they might disappoint. Well, disappoint they did, and we didn't manage to hold on to the 1.1300 level, ending the week at 1.1289. Unrevised at just 0.2% just isn't good enough, and if UK figures continue to disappoint in this way, we're in trouble.
Complete and utter...
Tosh. I like to keep tabs on what commentators are saying about the markets during the week. It makes an interesting diversion from scouring local fields looking for my lost cat, who of course turns up just after I've set out in the rain... Anyway, sometimes I am reminded of why I'm so happy not to be involved in these markets directly anymore. Take this as an example:
'GBP looks to be playing `catch-up` to the downside this week, after a week of outperformance last week, that may have an underlying cause in corporate flow.'
Ahem, excuse me? What's wrong with 'Sterling's going down the pan, as it should have done last week, and one reason is that companies are dumping it.' That has a more direct ring to it for me. Not that I agree with it though. Sure, the UK is a basket case at present, but surely Europe is a bigger basket, and the bigger they come, the harder they fall? Apparently not the case these days.
Downgrade the ratings, not the country's
You may recall a week or two ago Standard and Poor's saying that the American government was no longer AAA rated. In theory that should make their borrowing more expensive, and boy have they got some debt to fund. And yet despite this, it is still cheaper for the USA to borrow in the international markets than it is for say the UK or France, who both remain AAA rated. What do we glean from this? How about the fact that S&P are themselves hugely overrated?
Southbound
No matter how much I protest, it looks as though we are about to hit another rocky patch against that king of bluff and bluster, the Euro. We probably have ourselves to blame in the sense that we are simply not doing enough to drag ourselves out of the economic mire. When I say 'we' I mean our economic political masters, who insist they are standing firm in the face of adversity whilst actually edging back towards the precipice. Yes, I still think sterling should be at 1.2500, but it could do with some help from those who are most directly involved in steering the economy.
Watch out for the 1.10 level soon if nothing explodes in the Eurozone.
Friday, August 26, 2011
Saturday, August 20, 2011
F/X Weekly comment
Pretty much more of the same this week, with the markets trying to pick the best of a bad bunch. Sterling actually did quite well for a few days, moving into the mid 1.1500 as one point, but we end the week on a familiar note, and back down at the 1.1450 mark, not too bad in terms of this year, but woefully short of where we could and should be.
Euro's weak
EU and German GDP figures released this week were disappointing. The German economy only grew by 0.1%, France by 0.0%, and the EU as a whole only 0.2%. The slow growth figures hampered the Euro, allowing sterling to make gains during the week. Sarkozy and Merkel also had another little get-together this week, but were unable to come up with a unified agreement on debt this weakened the Euro further. Watch out for more developments on Eurozone debt next week.
Sterling's nearly as weak
All was going swimmingly for the first three or four days of this week. Sterling was perceived as the best of the bunch on the currency markets for a change. That might seem remarkable, but the choices were limited. The USD is going through its own crisis at the moment, and other potential safe havens such as the yen and the Swiss franc have become so strong that their governments have been taking drastic measures to weaken their currencies. For all its faults, sterling can be seen as a bastion of financial stability in relation to many other countries in some people's eyes.
Then Friday the UK Public Sector Net Borrowing figure showed that the UK generated £2bn of new debt in July alone. This cannot have come as a huge surprise to the market given what we know about the strength of the recovery, but it weighed down on sterling and we managed to give up most of the week's gains during the rest of the day.
What now?
Next week we have the UK GDP Growth figures for the second quarter, and they aren't likely to be up to much either, so stand by for a dodgy time next week. My forecast last week was 1.1350 and I talked about timing being of the essence. I think maybe 1.1350might be a good place to be this time next week.
Euro's weak
EU and German GDP figures released this week were disappointing. The German economy only grew by 0.1%, France by 0.0%, and the EU as a whole only 0.2%. The slow growth figures hampered the Euro, allowing sterling to make gains during the week. Sarkozy and Merkel also had another little get-together this week, but were unable to come up with a unified agreement on debt this weakened the Euro further. Watch out for more developments on Eurozone debt next week.
Sterling's nearly as weak
All was going swimmingly for the first three or four days of this week. Sterling was perceived as the best of the bunch on the currency markets for a change. That might seem remarkable, but the choices were limited. The USD is going through its own crisis at the moment, and other potential safe havens such as the yen and the Swiss franc have become so strong that their governments have been taking drastic measures to weaken their currencies. For all its faults, sterling can be seen as a bastion of financial stability in relation to many other countries in some people's eyes.
Then Friday the UK Public Sector Net Borrowing figure showed that the UK generated £2bn of new debt in July alone. This cannot have come as a huge surprise to the market given what we know about the strength of the recovery, but it weighed down on sterling and we managed to give up most of the week's gains during the rest of the day.
What now?
Next week we have the UK GDP Growth figures for the second quarter, and they aren't likely to be up to much either, so stand by for a dodgy time next week. My forecast last week was 1.1350 and I talked about timing being of the essence. I think maybe 1.1350might be a good place to be this time next week.
Saturday, August 13, 2011
F/X Weekly Comment
A very familiar theme emerged this week. More of the 'After you Mervyn. No no, after you Claude.' Sterling once again managed to regress when faced with the likelihood of progression against the Euro, and instead of pressing on towards the 1.1600 level as I had hoped, it bounced around all over the place and we finished up at 1.1420.
Euro woes
Let's not think for a minute that the Euro is off the hook here. When European Commission President Jose Barroso warns that financial markets are not convinced that Eurozone governments are prepared to take necessary action to defend the stability of the Eurozone, you should know wthat you have a problem on your hands. Barroso went on to say that the Eurozone crisis is no longer confined to the peripheral states. Too right it's not. Italy's Berlusconi was forced to announce another austerity package yesterday amounting to €62 bn, and even our own M. Sarkozy called back all his ministers from holifay this week and gave them ten days to come up with more cost saving measures. That should be fun. At one stage France looked set to lose its AAA rated status, and may well yet do so. Germany is now the only European country that has truly sovereign debt, that is IOUs that are worth the paper they're printed on. Do we really believe that France can afford to make additional contributions to the potential bailout packages for Spain and Italy?
Yet still the Euro juggernaut rumbles on, although the wheels are looking a little loose.
Sterling woes
OK, so where shall I start? How about a bit of civil unrest? We smirked at the (mini) riots in Greece when the austerity packages were announced. 'There you are you see. Unruly lot. Can't take the heat'. Well there was a lot of heat kicking around our major city centres this week, and the currency markets took note. Mindless moronic thugs out to loot whatever they could get their hand son, or a cry for social justice from an underprivileged underclass? I know what version I believe, but whichever side you take, it doesn't look good to the outside world.
While all this was going on night after night, Mervyn stuck the boot in with the latest Bank of England Quarterly Inflation report, which saw a downward revision of growth for 2012 to 2.% (from 2.5%) and for 2011 to 1.5% (from 1.8%). These downgrades keep on coming, so how low will they get? He also added that the 'headwinds are getting stronger' and 'the mood in markets has taken a sharp turn for the worse'.
Cheer up though, we are doing rather well at the cricket...
What now?
What a good question. I sometimes ask myself why I keep on asking it. In truth I suspect that the answer lies in the timing. Which currency will weaken soonest? A couple of high powered forecasters are suggesting that sterling will be down at 1.0500 well before Christmas. Personally, I don't see it. It might have merit on Sterling's performance alone, but I can't see that it takes into account the fragility of the Euro. Don't hold off from dealing just because of my view though (in fact NEVER do that). The near term outlook is getting very confused. Longer term I'm still very bullish for Sterling, but we have to start seeing some decent signs of economic recovery, and they're not there yet.
Pushed for a price next week, I'd say 1.1350.
Euro woes
Let's not think for a minute that the Euro is off the hook here. When European Commission President Jose Barroso warns that financial markets are not convinced that Eurozone governments are prepared to take necessary action to defend the stability of the Eurozone, you should know wthat you have a problem on your hands. Barroso went on to say that the Eurozone crisis is no longer confined to the peripheral states. Too right it's not. Italy's Berlusconi was forced to announce another austerity package yesterday amounting to €62 bn, and even our own M. Sarkozy called back all his ministers from holifay this week and gave them ten days to come up with more cost saving measures. That should be fun. At one stage France looked set to lose its AAA rated status, and may well yet do so. Germany is now the only European country that has truly sovereign debt, that is IOUs that are worth the paper they're printed on. Do we really believe that France can afford to make additional contributions to the potential bailout packages for Spain and Italy?
Yet still the Euro juggernaut rumbles on, although the wheels are looking a little loose.
Sterling woes
OK, so where shall I start? How about a bit of civil unrest? We smirked at the (mini) riots in Greece when the austerity packages were announced. 'There you are you see. Unruly lot. Can't take the heat'. Well there was a lot of heat kicking around our major city centres this week, and the currency markets took note. Mindless moronic thugs out to loot whatever they could get their hand son, or a cry for social justice from an underprivileged underclass? I know what version I believe, but whichever side you take, it doesn't look good to the outside world.
While all this was going on night after night, Mervyn stuck the boot in with the latest Bank of England Quarterly Inflation report, which saw a downward revision of growth for 2012 to 2.% (from 2.5%) and for 2011 to 1.5% (from 1.8%). These downgrades keep on coming, so how low will they get? He also added that the 'headwinds are getting stronger' and 'the mood in markets has taken a sharp turn for the worse'.
Cheer up though, we are doing rather well at the cricket...
What now?
What a good question. I sometimes ask myself why I keep on asking it. In truth I suspect that the answer lies in the timing. Which currency will weaken soonest? A couple of high powered forecasters are suggesting that sterling will be down at 1.0500 well before Christmas. Personally, I don't see it. It might have merit on Sterling's performance alone, but I can't see that it takes into account the fragility of the Euro. Don't hold off from dealing just because of my view though (in fact NEVER do that). The near term outlook is getting very confused. Longer term I'm still very bullish for Sterling, but we have to start seeing some decent signs of economic recovery, and they're not there yet.
Pushed for a price next week, I'd say 1.1350.
Friday, August 5, 2011
F/X Weekly comment
Well, 1.1500 or higher I called for last week, and as I write this late on Friday afternoon here we are at 1.1540. And what a week it's been. Worries about Eurozone debt were boosted by worries about the US debt mountain that I spoke of last week. Together they make a formidable problem, and the world's stock markets have taken this all to heart and gone on a slide.
PIIGS
It's looking more and more likely that there may be two 'I's in PIGS, with Italy coming under the spotlight this week. So much so that Mr Berlusconi had to stand up in parliament and make strong noises in its defence. That ,as we know, is enough to spook any market, and sure enough the Euro suffered as a result. Then European Commission President Jose Manuel Barroso joined in the fun by warning that the Eurozone's sovereign debt crisis was spreading, reinforcing fears that Italy and Spain might become embroiled in the problems. His comments spooked the markets even more, and both the stock markets and the Euro finished lower.
So far Ireland, Greece and Portugal have been bailed out, Greece twice. The European Commission is quite rightly worried that it will not be able to afford to do the same for Spain and Italy, the zone's third and fourth largest economies. The ECB has announced that it will offer a fresh tranche of loans to banks to counter continuing fears about the eurozone debt crisis. Jean-Claude Trichet stated that economic uncertainty was 'particularly high'. Quite an understatement really!
UK
Unusually, sterling declined the opportunity to shoot itself in the foot and help the Euro out of its problems. In fact we actually came out with some better than expected Services PMI data.
IS
Which of course stands for Italy and Spain, a subset of PIIGS. For a flavour of what might be to come, today's economic data from both counties is interesting. Italian GDP rose 0.3% between April and June, up on 0.1% growth in the first quarter, according to data supplied by the Italian National Statistics Institute. The Spanish central bank predicted GDP growth of 0.2% during the same period, after growth of 0.3% last quarter. The bank called for decisive action by Eurozone leaders, and also for domestic action to introduce structural reforms aimed at reducing the country's deficit. Weak economic growth lowers tax revenues and makes it harder for both countries to tackle their deficits. Neither country is looking as if it has the underlying strength to drag itself out of the debt mess, and if the ECB can't afford it....
What now?
At the risk of ruining a good run (OK, a one-week run), I can still see trouble for the Euro, and a move into the 1.1600's looks possible to me.
PIIGS
It's looking more and more likely that there may be two 'I's in PIGS, with Italy coming under the spotlight this week. So much so that Mr Berlusconi had to stand up in parliament and make strong noises in its defence. That ,as we know, is enough to spook any market, and sure enough the Euro suffered as a result. Then European Commission President Jose Manuel Barroso joined in the fun by warning that the Eurozone's sovereign debt crisis was spreading, reinforcing fears that Italy and Spain might become embroiled in the problems. His comments spooked the markets even more, and both the stock markets and the Euro finished lower.
So far Ireland, Greece and Portugal have been bailed out, Greece twice. The European Commission is quite rightly worried that it will not be able to afford to do the same for Spain and Italy, the zone's third and fourth largest economies. The ECB has announced that it will offer a fresh tranche of loans to banks to counter continuing fears about the eurozone debt crisis. Jean-Claude Trichet stated that economic uncertainty was 'particularly high'. Quite an understatement really!
UK
Unusually, sterling declined the opportunity to shoot itself in the foot and help the Euro out of its problems. In fact we actually came out with some better than expected Services PMI data.
IS
Which of course stands for Italy and Spain, a subset of PIIGS. For a flavour of what might be to come, today's economic data from both counties is interesting. Italian GDP rose 0.3% between April and June, up on 0.1% growth in the first quarter, according to data supplied by the Italian National Statistics Institute. The Spanish central bank predicted GDP growth of 0.2% during the same period, after growth of 0.3% last quarter. The bank called for decisive action by Eurozone leaders, and also for domestic action to introduce structural reforms aimed at reducing the country's deficit. Weak economic growth lowers tax revenues and makes it harder for both countries to tackle their deficits. Neither country is looking as if it has the underlying strength to drag itself out of the debt mess, and if the ECB can't afford it....
What now?
At the risk of ruining a good run (OK, a one-week run), I can still see trouble for the Euro, and a move into the 1.1600's looks possible to me.
Subscribe to:
Posts (Atom)
Posts
