Concerns continue to mount in Europe as German exports fell by 1.8 percent in July, which was much more than expected. This month on month fall compares with a 1.2 percent decline in June. It has been stated that the German and French economies are slowly being dragged down by peripheral nations and this will do little to ease those fears. However, France on the back of a poor month recorded more positive results as their imports and exports both grew. Perhaps all this shows is that we are going through a volatile period in the economic recovery.
Pound Sterling – UK Markets
Manufacturing in the UK barely increased in July and industrial output as a whole declined. There was a minute increase of 0.1 percent in manufacturing this month. It continues along a volatile trend as output fell 0.4 percent in June but increased 1.8 percent in May. Sterling it appears reacts more than most to such data as our currency continued to fall against most of its major counterparts.
However, this aside, whilst the press paint a bleak picture of our economy and I understandably echo what is written on a day to day basis, to date this year we are actually one of the better performers in the world economy. We have initiated budget cuts designed to pull us out of the economic mess we were in. Our growth, whilst minimal, still exists and despite the concerns over the weak pound the governments aim is ensure our export industry is not stifled. Maybe a more positive outlook is what we need to pull us out of the current trend.
US Dollar – US Markets
Consumer spending took a leap in the right direction in the US according to the Federal Reserve. A publication, released eight times a year, highlights the risk factors facing the US economy as activity slowed in several regions. The latest setback was Hurricane Irene which hit New York more than most. Furthermore, car sales have also been knocked by ongoing supply disruptions caused by the Japanese Tsunami earlier this year. However, overall economic activity has continued to expand at a modest pace.
Later today the US will be releasing further jobless figures which after last weeks disastrous non-farm payroll data will be a much anticipated event in the markets. Economists predict that the figures will come in slightly higher than the previous level of 409k to touch 410k. It will be touch and go as to whether the markets have already factored this in but if there is any deviation from these figures there will undoubtedly be a reaction in the currency markets.
Euro – European Markets
Both Italy and Spain’s senates yesterday approved controversial austerity measures which plan to re-balance the books. The more controversial of the two was Italy’s. The original package approved by the cabinet last month has been at the centre of a debate that has seen it overhauled several times following immense pressure from the European Central Bank and the European Union. The package includes tax increases, an extension of the retirement age for women in the private sector and introducing a tax on very high earners. The combination of tax hikes and spending cuts amount to more than 54 billion Euros over the next three years.
German Chancellor Angela Merkel has been thrown a vote of confidence after a ruling that Berlin’s decision to fund a rescue of Greece was legal. In the future the government will have to consult the budget committee in Germany’s lower house before spending any more on future bailouts. However, this news has been met with some fierce opposition. Dutch Prime Minister Mark Rutte stated that Europe needs a blanket commissioner for budget discipline which punishes nations for breaking fiscal rules.
Other Currencies – Highlights
Australia’s dollar fell against all of its 16 major counterparts after a report showed employers unexpectedly cut jobs in August. This just goes to a reaffirm the currencies status as one of the more volatile around.
The US Dollar Rallies on Upbeat Data and Hawkish Fed Stance
Soft CPI Data, Lack of Progress in Brexit Talks Hurt Pound Sterling
Strong Labour Market Data from UK Lift Pound Sterling