UK – A Sitting Duck Waiting To Be Plucked

It appears as though the markets have taken a time out today after what has proven to be a volatile couple of weeks. The US debt crisis continues to rumble on and underlying concerns remain over the Eurozone’s ability to prevent debt spreading. Whilst in the UK we still remain the sitting duck, open to counter attacks from all directions. Luckily for us, today appears as though it may be a quiet day on the data front. Tomorrow however could be a different story…

Pound Sterling – UK Markets

A quiet day in the UK markets gives us time to reflect on what continues to be an uphill battle for our economy. With inflation still way above the Bank of England’s 2 percent target rate, policy maker David Miles has stated that attempts to slow prices too quickly risks stalling the economic recovery. Sterling remained heavily range-bound versus the euro yesterday, fluctuating in the 1.13’s. The BoE expect inflation to remain well above target throughout next year as higher energy costs, a weak currency and increases in sales tax are temporarily driving prices higher.

US Dollar – US Markets

US economic growth has understandably slowed in recent weeks due to the ongoing issues in the housing and labour markets. Whilst the news is negative it is welcome relief to be able to report on something other than the US debt crisis that continues to send the markets into tailspins that would have made Michael Jackson proud. However, I cannot avoid the issue completely as it is clearly the underlying problem affecting all others at present. Whilst a clear resolution is yet to be determined, UK based credit ratings agency Standard and Poor’s has indicated that their decision over whether or not to downgrade the US rests solely on its view of Washington. Long term, there is concern over the ongoing political divide that is delaying a solution to the debt crisis.

Euro – European Markets

There is pressure mounting on the euro as economists continued to voice concerns that the debt crisis has just begin. There is worry in the markets that believe sovereign debt problems will spread through other nations. Furthermore, ratings agency Standard and Poor’s has cut Greece’s credit rating once more. The nation had its CCC rating cut to CC on the belief that plans to restructure the nation’s debt constitute a selective default. This follows downgrades earlier this week by Moody’s and Fitch has indicated it may follow suit.

Other Currencies – Highlights

Whilst the Australian Dollar continued its rise, the Reserve Bank of Australia is still in an awkward position because of inflationary pressure, a slowing economic recovery and global risks that further threaten the nation. However, whilst rates look set to be held next week, traders now feel that a rate rise is on the horizon. As one of the few FX brokers to be actively trading the Brazilian Real it may be worth noting that the currency declined by the most in more than a month yesterday. This resulted from the government announcing it will levy a tax on certain investments in foreign exchange derivatives.