The UK Chancellor, George Osborne, has been defending the cuts he outlined in the spending review on Wednesday. With the interest payments on the UK’s debt amounting to £43 billion a year, clearly something needs to be done to put the nation on a solvent footing and curb this profligate wastage which could be channelled into something much more worthwhile than a financier’s pockets.
Of course, the devil is in the detail and the detail is what is provoking heated argument. In brief, the plans will: axe 490 000 public sector jobs; cut government departmental spending by an average of 19% over four years; the welfare budget is to be cut by £7 billion; 4% reduction in police funding; increase retirement age to 66 by 2020; and the bank levy is to become a permanent feature.
The measures are designed to eliminate the structural deficit within five years.
Pound Sterling – UK Markets
Sterling has retreated from the recent gains that it made against the Euro and was 0.2% lower at yesterday’s close in Europe with £1 buying €1.1338. The currency again weakened slightly against the US Dollar and the Japanese Yen closing at $1.5715 and ¥127.65, respectively.
US Dollar – US Markets
The US Dollar ended yesterday’s trading session flat against the Euro with the single European currency buying $1.3861. In overnight and early European trading, the Euro has rallied and is currently trading at $1.3966 (at 08:00 GMT).
US bank Morgan Stanley has surprised analysts by reporting a loss of $91 million for Q3. The loss was partially attributable to a bad bet in backing an Atlantic City casino company which meant that $229 million had to be written-down, but the loss reflects the current difficult conditions within the wider American economy.
Euro – European Markets
In early European trading, the Euro is strengthening against Sterling and the US Dollar. The Pound was trading at €1.1271 at 08:00 GMT.
Swiss banking giant Credit Swiss has reported a 74% drop in profits in Q3 which has been blamed on turbulent market conditions affecting its investment arm. Investment banking activity revenues were down by almost a third because of low client demand. Market conditions meant that revenue generation from organising stock offerings and provide merger and acquisition advice was down.
The Euro is currently buying 1.355 CHF and has generally been strengthening over the course of the year to date.
Other Currencies – Highlights
Hard on the heels of a rate rise, figures emerging from China show that the economy is slowing. Data just released shows that the growth in Q3 had slowed to 9.6% from 10% reported for Q2. The results are still spectacular when compared against the anaemic growth seen in China’s competitor economies. Chinese consumer prices are increasing at their fastest rate for two years with inflation running at 3.6% year-on-year, with food price inflation at 6%.
£1 was buying 10.4537 Chinese Yuan at yesterday’s market close.
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Dollar Weakens as Fed Rate Cut in July Seems Imminent