Another good week for the ten bob note.  Sterling seems on the face of it to be cruising at the moment, ending the week at a comfortable 1.2260, but under the surface things are a little more frantic...



Double Dip Recession


We've been hearing about this for months, and here we are.  It's finally arrived.  GDP figures this week show a 0.2% shrinkage in the first three months of 2012.  The economy shrank by 0.3% in the fourth quarter of 2011, and the technical definition of a recession is defined as two consecutive quarters of contraction.  So there we are, the dreaded Double-Dip.  Well, maybe, and maybe not.  This week’s GDP figure is only an early estimate, and is subject to at least two further revisions in the coming months.  I think that there is enough evidence from other data to suspect that the DD might not actually have happened at all.

This didn't however stop Martin Weale beating a drum again for more QE.  If you remember, he and Adam Posen were the two of Merv's crew calling for the printing presses to be cranked up.  Then last month Posen decided enough was enough.  Weale obviously hasn't given up yet though.


Hollande and France

This could get a little confusing.  The Dutch government collapsed this week, unable to reach agreement on an austerity package.  At the same time Francois Hollande beat Sarko in the first round of the Presidential election.  This does not mean that the French president is going to be Dutch, but it does mean that the mighty Euro is having to brush off some fairly considerable blows, and is showing signs of stress.  M. Hollande, after all, is no great fan of austerity packages and tax hikes.  Think of it another way.  The names Hollande and Merkel don't merge together in any way as well as Merkozy does.



S&P Again

This time downgrading Spain’s credit rating by two levels, to BBB+ with a negative outlook, increasing worries that the inherent debt crisis engulfing much of Europe is spreading at a faster rate. The Euro drifted weaker through Thursday, as reports from  Italy showed a bigger decline in business confidence, which sank to the lowest level in over two years. Business confidence in the Euro-zone as a whole also fell sharply in April.


What now?

Still onwards and upwards for me.  1.25 here we come.  The trick here will be to work out when to press the 'buy' button, and avoid being too greedy.