As we step back in the dragons den ongoing concerns over Greek stability (or lack of) continues to unnerve the markets. Whilst there has been little movement in forex terms just yet, the latest commodity to suffer is oil. Prices have fallen in early trading as concerns persist about the impact of the debt crisis in the eurozone. Unfortunately for Greece and fellow sovereign nations in crisis, top leaders continue to hold ‘talks’ but, with little action resulting from whatever is being spoken about, investors are becoming increasingly frustrated. The continent needs a severe wake up call…
Pound Sterling – UK Markets
The Bank of England has hinted further towards possible quantitative easing after talking up the success of its original programme. However, with concerns lingering over the pace at which inflation continues to increase it must be noted that the previous round of QE hiked consumer price inflation by between 0.75 and 1.5 percentage points. So, the real decision at hand is whether the BoE switches its attention from inflation to growth. QE would certainly be a huge step in that direction.
This Wednesday will also see the release of Nationwide’s consumer confidence statistics. Since June it dropped from 55, to 51 in July and 49 in August. A figure below 50 indicates negative growth. However, simply halting the decline would be a positive step for the UK economy. Sterling has begun the week much where it left off – in relative obscurity versus the euro and struggling against the US Dollar which continues to outperform its major counterparts.
US Dollar – US Markets
President Barack Obama may finally be getting his way with regards to taxes. He is planning a higher minimum tax rate on the richest Americans to ensure they are taxed at the same rate as those less wealthy. Details of the proposed increases are likely to be released later today when he reveals his long term plan to reduce the budget deficit. All I can say Mr President is I wish you the best of luck trying to get this past the Republicans!
The economy itself continues to underperform with unemployment still above 9 percent and growth near zero. Currency movements at present aren’t replicating economic activity which makes this a very difficult one to call as the dollar continues to strengthen. However, this may be purely down to the simple fact that investors are running away from the eurozone.
Euro – European Markets
As a Greek citizen the following news would have sent chills through your bones. As if current cuts weren’t crippling the nation enough as it is, the government has announced plans to take austerity measures even further. Whilst Prime Minister George Papandreou did not announce any specific new measures last night it is expected that further cuts are being made compulsory before the International Monetary Fund releases its next loan.
The euro weakened further this morning. However, once again, the reason behind this was slightly baffling. Data revealed that European Monetary Output increased to1.4 percent in July compared to a reading of -1.3 percent in June. At first glance we were expecting to see the euro claw back further ground across the board. In reality the single currency furthered its declines in a rapid movement that saw it lose almost 30 points against sterling.
Other Currencies – Highlights
The Australian and New Zealand Dollar’s continue their declines as concerns remain over the current and future state of the eurozone. This pessimism has dire effects on these markets as investors steer clear of currencies linked to global growth.
Sterling Rises Sharply on Renewed Hopes of the UK Leaving With a Deal
Dollar Rises Modestly on FOMC Minutes
Sterling Rises on Hopes of EU Softening Tone on Backstop