Sterling On The Ropes Again

Since its Friday, I feel a short summary of our three major markets is a fitting way to end the week. Unfortunately, it all screams debt! Ratings agency Moody’s has continued its attack on world economies, stating that it may also downgrade the debt rating of the US. Greece will apparently cash in on a whopping bailout this morning and sterling is an endangered species as it continues to wobble. Once again we ask; who will be the worst performer this year? Pound Sterling Unfortunately, once again sterling has come under fire, as PMI data released this morning came in below expectation and also below previous figures. PMI data outlines the economic situation in the UK services sector, basically incorporating the condition of general sales and employment. On the back of this we can summarise that we have had another dismal week for sterling, as a sluggish recovery points towards interest rates being put firmly on hold for the foreseeable future. Dollar With the debt ceiling in the US yet to be breached, a stark warning from ratings agency Moody’s may force the Federal Reserve into action. The problem that currently faces the nation is that neither the Democrats nor Republicans are willing to budge from their public views over the government’s finances. Unemployment figures due to be released later today, along with non-farm payrolls, are both expected to push the Dollar down further against major counterparts. A slowing economy may prevent the Fed from tightening its monetary policy. Non-farm payrolls often have a fairly immediate impact on the markets, so if the Dollar is your focus it is worth speaking to your broker before GMT 13:30 today. Euro Greece will present a new austerity plan to the ECB this morning, which will more than likely signal a second bailout package is ready to be handed to the debt stricken nation. The euro has strengthened quite heavily over the past couple of days on the back of this. The plan is set to involve a sell-off schedule of €50bn of state assets and €6.4bn of new budget cuts, including tax rises, which is sure to go down like a lead balloon with the general public in Greece. In terms of data, this morning saw German and European Monetary Union purchasing manager index data released. Whilst the figures came in above expectations, they were still down from the previous month. This, however, has had very little effect on the ever resilient euro. Other Currencies – Highlights On the back of increased euro confidence, the South African Rand has rallied to a three week high versus the US Dollar. Coupled with a weakening US economy bonds rallied, which sent yields to five-month lows. The rand gained as much as 1 percent against the dollar and leveled off to approximately 0.9 percent this morning. Asian currencies as a whole gained heavily for the third consecutive week, on the back of reports that central banks will increase interest rates in an attempt to curtail soaring levels of inflation. This has consequently boosted yield advantages on local assets.