Swiss Instigate Currency War

The Swiss Franc continues to dominate currency news this morning after a historic announcement by the Swiss National Bank yesterday. Although this had an in immediate effect on the market, the SNB will come under increasing pressure from investors worldwide who see this decision as a smoke and mirrors ploy. The only immediate beneficiary of this decision was gold that continued its climb to well above the $1,900 per ounce level. With the sort of power the Swiss have at present there will undoubtedly be huge levels of volatility in the coming weeks as the markets re-adjust themselves.

Pound Sterling – UK Markets

Just as we thought news couldn’t get any worse for the UK, hampered by ourselves and those around us, we have been rocked by more negative forecasts. Over recent months we have seen an improvement in employment levels. However, the Recruitment and Employment Confederation now believe that the economy could run out of steam as the year comes to a close. Even as inflation threatens to hit 5 percent, pay in levels also suffered last month as increases were the lowest for 22 months. With growth near zero and economic confidence at a year low employers continue to take a cautious approach to hiring decisions. In the last 24 hours sterling has been on a real rollercoaster ride. It began yesterday in the 1.14’s versus the euro and the 1.61’s against the US Dollar. However, it soon became apparent that this was a short term recovery. It is worth speaking to your broker to get an updated view following yesterday’s events.

US Dollar – US Markets

For those of you interested in the US Dollar you will have been scratching your head yesterday when it remarkably had a turn of fortune. Strong service sector performance in the US was the single reason for the improvement. Non-manufacturing purchasing manager index data in August jumped to 53.3. This compared to July’s figure of 52.7. Not only was there a month on month improvement, it was significantly better than economists had forecast. The release of these figures now lead economists to believe that the US is on track for a solid economic growth figure in the third quarter, which could now reach up to an annualised 1.5 percent.

Euro – European Markets

Issues continue to pile up in the eurozone: minimal growth in core nations; rising yields on Spanish and Italian bonds; and now a major bank adding to concerns surrounding Greece. RBS have stated that they believe Greece will default in December this year as yields on the sovereign’s short term debt reached a record high yesterday. As finance ministers failed to reach a deal on the collateral they will demand in return for Greece’s second bailout, market interest rates on its two year debt shot to a new high of 53.2 percent. Whether RBS’ prediction will prove to be correct, only time will tell. However, the euro has once again failed to react imminently to such news and still stands relatively strong against the majority of major currencies.

Other Currencies – Highlights

The rand appreciated for the first day in five against the dollar as stocks and metal prices rose, reducing demand for the US Dollar. This was the forming trend amongst a number of emerging markets as stocks across the board rose for the first time in four days and prices of industrial metals advanced after the news in Switzerland echoed its way through the markets.