Despite declarations that the Irish have not approached the EU for help, fears over the ability of the government to deliver on a sweeping austerity budget persist and have pushed the Euro lower over the last twenty four hours. The crisis in the financial and property sectors have left Eurozone member Ireland with a huge current deficit of 32% of GDP. The Irish intend to rein debt back to 3% of GDP by 2014.
Pound Sterling – UK Markets
The Pound has hit a five week high against the Euro on renewed concerns about the sovereign debt crisis in Greece and Ireland.
The Pound strengthened against the Euro by 0.6% yesterday, closing at €1.1592.
This morning has seen very volatile movements with the Pound moving both up to and down again from 1.161 to 1.164 against the Euro in the space of a few minutes. This volatility is a reaction to the wealth of UK data releases at 9.30am this morning. Manufacturing production has come in just below target whereas industrial production has come in above target. This was also accompanied by the latest trade deficit figures for September which measures how much imports are outweighing exports in the UK. This came in at an improved figure of - £4.6 billion which shows a narrowing from the -£4.9 billion of the month before. The Pound has been picking up against the Dollar since about 9am.
Barclays Bank has reported a small rise in underlying profits in Q3 against a backdrop of slowing activity. The investment arm of the bank saw a 24% reduction in activity over the previous 12 months.
Tomorrow's Bank of England inflation report along with Bank of England governor speech will be worth watching for any change in outlook following the last round of positive GDP figures – this could have an impact on Sterling.
US Dollar – US Markets
The Dollar has fallen against Sterling since yesterday and having risen against the Euro has begun a sharp fall since 9am this morning.
The Dollar is mainly reacting to news in other currencies but tomorrow comes back on the economic data calendar with a wealth of potentially market moving data including mortgage application statistics, import data, jobless claims, trade balance and the monthly budget statement.
The US has dropped calls for a move to get G20 nations to hold trade imbalances to a maximum of 4% of GDP. The issue of foreign exchange will be a key topic when G20 leaders meet in Seoul later this week, particularly in light of the criticism of the Federal Reserve's QE measures which some see as a downwards manipulation of the Dollar.
Euro – European Markets
The Euro has fallen against other major currencies against renewed fears of the sovereign debt crisis as Portugal prepares to sell 1.25 billion Euros of bonds tomorrow.
Concerns that Greece would be plunged into further chaos by the government's resignation have been allayed.
However, fresh concern about Irish debt problems have also been a problem for the Euro and have sent the yield on bonds to a high of 7.84% for the ten-year bond, a margin of 5.56% over their German counterparts. Political uncertainty is also a factor as the government's majority could disappear if four by-elections go against them.
Other Currencies – Highlights
The Canadian Dollar has dropped from parity with the US Dollar having traded on a one-for-one basis with US Dollar for the first time in three weeks.
China has said that it is going to crack down on speculative ‘hot money' flowing into the country from banks. Chinese import, export and trade balance data which has been the cause of much speculation in line with concerns over a ‘currency war' and Asian exports is revealed tomorrow.
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