F/X weekly comment

Well this is about as exciting as watching paint dry. Here we are at the end of this week at 1.2000, a mere 40 points away from where we finished last week, and the week before, and exactly the same as the week before that. I looked at one website today that was clearly trying to drum up some interest for its foreign exchange business by showing a choppy chart for sterling Euro over the week. It was only by looking at the axes that you could see that the high was 1.2008 and the low 1.1975. When I were but a lad you'd expect to see that sort of movement while you had a cup of coffee and your first fag of the day. Remember smoking in offices? You had to join in or it would make you feel ill. Not that we had Euros in those days though. Real currencies for me, deutschmarks and francs; lire and pesetas; escudos and drachma.

There was however quite a bit of action in the background this week, even if it didn't filter through into market movement:


Poor UK data

No, surely not? Aren't we supposed to be bursting out of recession into the blossoming spring of recovery? Not according to GfK NOP (whoever they may be), who announced that we consumers suffered a lapse in confidence in March as we became more worried about the financial outlook and the economy in general. The index decreased two points to -31 from -29 in February, according to the survey. It is the lowest since reading since December (not exactly a long timescale there) and contradicted expectations of a small improvement. On a longer timescale, it is three points lower than a year ago, which may well help to wipe any smug grins off faces at the BoE.
We also heard that mortgage approvals fell during the month, and money supply for February registered its biggest monthly fall ever (impressive huh?). This was followed by poor figures in the services sector and to round it all off UK house prices had their sharpest drop in over 2 years.
Well not exactly rounding it all off, because the OECD then stuck the boot in when they calculated that the UK economy shrank in the first three months of the year, which means, dear friends, that we are back into a recession. Let's hope they're wrong on that one.
So how the hell did sterling shrug all this off and end the week 30 points higher than last week? Surely we should be hanging on to our parachutes for dear life as we plummet down towards parity?

Greece is the word

Standard & Poors commented that Stavros and friends may need yet further fiscal re-structuring in order to eventually get itself out of the mire. The Greek Tragedy has dropped out of the headlines over the past couple of weeks, thanks to the confirmation that it would be receiving the €130bn second bail-out. Strange that it should take so long for anyone to draw this obvious conclusion, but who am I to comment?

But...

Could it have been the Greek appetizer for a Spanish main course? Spain is in deep trouble. There are 5.4 million unemployed people in Spain, 23.3% of the workforce. Youth unemployment is at almost 50%. The new government forecasts another 600,000 unemployed Spaniards by the end of 2012. 430,000 Spanish families are to be evicted from their homes by 2016 if Spanish banks and courts keep up the current rate of mortgage foreclosures. The latest austerity budget is cutting nearly €30bn rom public spending this year alone. The general strike on Thursday is not going to create more jobs for the millions of unemployed Spaniards who are deeply despondent about the inability of modern Spain’s economic and political system to offer them and their children a proper future.



What now?


For now I'll stick again to last week's forecast of 1.2125. I'm beginning to get a sense that the balance is swinging against the Euro. It used to be that whatever was good in the UK couldn't manage to boost the pound. Now it seems that continuing bad news seems unable to damage it. Blind faith it might be, but it's worth a go!.