Britain is becoming more miserable. This according to economists who use a tool called the misery index to measure the level of unhappiness amongst people. The cause of this is largely due to the rising number of people who are jobless and a substantial increase in the cost of living; both of which jumped to a fresh high last month. An extra 37,100 people joined the dole queue during that period. With price pressures also soaring, the misery index graph appears to be spiraling wildly out of control. And here I was thinking it was all due to the weather…
Pound Sterling – UK Markets
Sterling, despite all its downfalls has begun the day in a positive manner, despite being confronted with less than promising data. At GMT 09:30 this morning, retail sales figures came in lower than expected once again. The news comes as little surprise seeing as in the months following the Royal Wedding retail figures have been on a constant decline. It just goes to show that the misery index really is an accurate reflection of our economy.
However, as I stated, sterling has held firm and following its march against the US Dollar yesterday has also gained against the euro. It is also pleasant to see that give or take a few pips we are sticking to our guns and showing few signs of weakness.
US Dollar – US Markets
The US Dollar yesterday slipped severely in the afternoon. Week’s of turmoil in the US appears to have caught up with the greenback. Even though producer prices came in slightly better than expected yesterday the currency continued to slide. However, it is believed that because the Federal Reserve has concluded that interest rates will be kept on hold until at least 2013, positive data will do little to aid the lagging economy.
Later today, consumer price data is to be released. However, little change is expected from last month following a 0.2 percent rise in July. The gauge added 0.3 percent in each of the previous two months, the biggest consecutive gain in three years. With this in mind, US inflation is not yet weak enough for the Fed to consider a third round of quantitative easing.
Euro – European Markets
Following the Meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy, leading economists have labelled the proposed Tobin tax “economic suicide”. The tax would be aimed at financial transactions and would essentially drive jobs away from the City to lower-taxed parts of the world, rather than actually adding income. The proposition is set to be tabled at the European Union in September.
Further to this the European Central Bank has come under pressure to purchase more government debt to prevent speculators from driving borrowing costs for Spain and Italy back up again. Last weeks record purchases forced yields on bonds in the respective nations down below 6 percent. Whilst the programme last week was very effective in deterring panic selling a further obstacle appears to be on the horizon. The question remains, how far will the ECB go?
Other Currencies – Highlights
The Swiss National Bank is struggling to pull the Swiss Franc back from record highs. The strength of the currency is damaging to the export economy and for that reason the SNB has said it will now increase the cash in francs available to banks from 120 billion to 200 billion. They have also stated that they will increase its spending by 2 billion francs to help boost the domestic economy. Despite all this, investors continue to move into the franc due to worries over the eurozone and US debt crisis.