KAHN IT BE TRUE?

A frantic Monday morning has been dominated by France’s presidential election being thrown into chaos. International Monetary Fund chief Dominique Strauss-Kahn is awaiting his first court appearance on the back of allegations he sexually assaulted a hotel maid following a flight back from John F Kennedy Airport. The scandal has clouded Greek aid talks as they will today plead for a boost in its 110 billion-euro bailout package from European governments.

Pound Sterling – UK Markets

Whilst we are all awaiting promising news for Sterling it is expected that there is little sign of a recovery on the horizon. Whilst I continue to find it bizarre that talks of an interest rate rise are on the horizon, Bank of England Governor, Mervyn King along with a few others (including myself), understand that an interest rate rise at this point in time would do little to curb increasing levels of inflation. However, Sterling snapped 4 day declines versus the US Dollar as a report showed that UK home sellers increased asking prices to the highest levels since 2008 this month. Overall, asking prices rose by an average of 1.3 percent this month and versus last year, we have seen an increase of 0.7 percent. Whilst this has come as a welcome surprise against the euro, Sterling remains unchanged versus the US Dollar.

US Dollar – US Markets

With many of us venting our frustration at the state of the US economy over recent months, views that the country may be verging on bankruptcy may not be far from the truth. President Barack Obama’s backing to extend the governments borrowing authority are reported to be close to being authorised as the republicans seek to enforce spending cuts and no tax increases in return. True, I would like to offer some words of welcome relief; the bottom line is there aren’t any. Sales and construction of US homes hovered near the lows of the recession in April, whilst investors are keeping a watchful eye on manufacturing data as this remains the only saving grace for a dwindling economic recovery.

Euro – European Markets

Following last weeks decline, the euro is expected to fall further over concerns European finance ministers will fail to dampen speculation Greece will have to restructure its debt. Whilst the single currency has erased its decline versus the US Dollar it has fallen sharply against 10 of its 16 major counterparts. The restructure will hit the far reaches of Europe as issues may bleed into Eastern Europe by curbing overseas lending from western banks. This is expected to undermine recent investor bets that have fuelled the regions stocks, bonds and currencies. An unparalleled 76 percent of the banking market is controlled by Western European lenders so the threat could be extensive.

Other Currencies – Highlights

Global increases in energy prices have hit the booming middle class nation of India as the government moved to increase gas prices by the most in three years. The action is expected to accelerate what is already the fastest inflation rate amongst Asia’s major economies which could in turn dampen the demand for its nation’s assets. Further afield, the Australian Dollar appears to be suffering as falling commodity prices are curbing demand for the nation’s assets. The Aussie fell to a near 3 week low versus the US Dollar whilst its close neighbour in New Zealand followed suit falling for the second consecutive day.