A September False Start

Unlike the athletes taking advantage of Usain Bolt’s false start in the 100m final, the UK, US and eurozone have all failed to take advantage of each others failings. All three economies have revealed negative data overnight and throughout the morning. After a bumpy August, I’m sure we were all hoping for a positive start to September. However, as winter beckons the already gloomy prospects don’t appear to be getting brighter.

Pound Sterling – UK Markets

An ongoing feature of our stagnating economy is the dwindling house prices. Mortgage lender Nationwide expect Augusts’ figures to come in 0.6 percent lower than in July and 0.4 percent down on the same month 1 year ago. This would equate to the sharpest decline in 10 months. With no improvement likely in the near future they have warned consumers to expect more of the same for the remainder of 2011. However, with interest rates set to remain on hold well into 2012, support is there for homeowners and domestic spenders. Furthermore, adding to the UK’s woes, the British Chambers of Commerce has once again downgraded its forecast for economic growth this year for the third time. They now expect the economy to expand by just 1.1 percent in 2011. This compared to its 1.3 percent estimate in June and 1.9 percent at the start of the year. With this in mind there is no surprise in revealing that sterling dropped against most of its major counterparts overnight, excluding the euro. This however would appear to be down to euro weakening.

US Dollar – US Markets

US manufacturing data is expected to show that the industry shrank in August for the first time in two years. This would be a huge blow for the US economy as manufacturing was considered one of the biggest sources of strength for the flagging nation. The manufacturing index fell to 48.5 last month from 50.9 in July. This is significant seeing as the dividing line between expansion and contraction is 50. The last time this gauge fell below this benchmark level was in July 2009.

Euro – European Markets

The only relevant data out today to affect the euro appears to be early morning manufacturing data that stemmed from Germany and the eurozone as a whole. However, the figures have done little to ease the tension sweeping across the continent as both figures came in lower than July’s figures and also lower than expectations. In the immediate aftermath of this data, the euro fell back slightly across the board. There were no great movements to get excited about but it may be worth speaking to your broker to get an idea of what difference this could make to your bottom line.

Other Currencies – Highlights

The Japanese Yen fell against all but 1 of its major counterparts as Chinese manufacturing rose in line with forecasts and gains in stocks sapped demand for the safest assets. Furthermore, the Swiss Franc showed its resilience after it gained against most of its major peers even after a report showed the economy expanded at the weakest quarterly pace since 2009.