US Information Overload

The US will be taking centre stage this week as a raft of data is set to take the markets by storm. Take away the speculation that the Federal Reserve is set to indicate its third round of quantitative easing and they still look set for a bumpy ride. To begin with housing data will be the focus tomorrow and Wednesday. However, thereafter unemployment related data and GDP figures guarantee a bit of market skepticism. The UK will join the US in housing and GDP figures but we are sitting on slightly more predictable grounds and therefore we can predict fewer jitters.

Pound Sterling – UK Markets

The difficulties associated with the economic recovery (or lack of) appears to be hitting home; quite literally. Almost 40 percent of households saw their finances deteriorate between July and August. And it did so at the fastest rate since February 2009 at the height of the last recession. Most households reported a rise in debt levels and a fall in savings and income. This influx of data just goes to show why we have seen retail figures continuously slide following the Royal Wedding. We expect this to continue throughout the year given the current state of the economy. Due to the lack of spending it has now been revealed more than 1 in 10 city centre shops across the UK were vacant at the end of May. Consumer spending has been hit hard by rising inflation, job losses and low wage growth. These statistics will worry Bank of England Governor Mervyn King who continues to maintain his bearish attitude towards UK economic growth. Meanwhile, he will also have one eye on the pound which has taken a dip over the weekend.

US Dollar – US Markets

United States Vice-President Joe Biden has told China that the US would never default on its debt. This came as the Chinese governments concerns grew due to their large holdings of dollar assets. However, Biden has told officials “you’re safe”. Chinese officials heavily criticised the political row that took the US onto the brink of a default and consequently caused the nation to be downgraded by rating agency Standard and Poor’s. However, record-low yields on US treasuries suggest traders are already anticipating a third round of quantitative easing is likely to take place in the near future. This is a scenario that the world’s biggest bond dealers said was unlikely. Poor economic data piled the pressure on the Federal Reserve as manufacturing, consumer confidence and unemployment continued to cause concern.

Euro – European Markets

Whilst everyone else continues to fret over the state of the euro, traders internationally have backing European Central Bank President Jean-Claude Trichet to save the single currency. Although the debt crisis now threatens Italy and Spain, it is worth bearing in mind the euro itself has appreciated 1.6 percent this year against a basket of nine developed nation counterparts. This only goes to underline the confidence investors are showing in the currency. Once more, the currency also followed up a poor week of economic data with further strengthening against sterling. Whilst this may baffle the majority of us, a strong day of trading on Friday and growing confidence in the markets over the state of the euro has been the cause of this resurgence.

Other Currencies – Highlights

Thailand was recently considered an Asian powerhouse as growth soared and its currency strengthened faster than any other in the region. However, a report over the weekend suggests that nation’s growth has slowed in the second quarter. The cause of this was supply chain disruptions caused by the earthquake and tsunami in Japan. Speculation that the Fed is likely to initiate quantitative easing has given way for the Australian and New Zealand Dollar to appreciate as demand for riskier assets was bolstered.