This report calls for blue sky thinking; a sense of proportionality and some outside the box ambition. Although it is Plain English Day so we’ll scrap all that and get on with it. At the end of the day, that’s what we want isn’t it, 110% commitment and passion. (If there are any other meaningless clichés you would like included in the next report, please let me know).
The people who attacked Prince Charles’s car were clearly not students. There was no report of anyone eating a kebab and one of them had clearly bought some paint. Students who understand decorating? Do me a favour.
In the markets, things were a little less frantic than they were in Parliament Square yesterday. No one was attacking Royalty but there was a bit of concern over Sovereign debt, so that comes close. European sovereign debt is at issue with one of the credit ratings agencies downgrading Irish debt in spite of a comparatively optimistic European Central Bank monthly bulletin. The ECB sees inflation moderating in 2011 and economic growth remaining on the soft side but their language was less negative than previous reports so the markets took a little heart from that. However, the ongoing debate about the state of the Eurozone union and the potential for disaster down the road, all combined to keep the Euro at similar levels all day. Sterling didn’t manage to push out of the top of its current trading range against the Euro.
That was no real surprise though because the UK data was absolutely in line with forecasts. The Bank of England kept its base rate on hold and left the level of quantitative easing at £200 billion; we all expected that but it is nice when the announcement matches the expectation. Today’s producer price data from the UK will be pretty influential on the value of the Pound.
More influential on the whole market though will be the release of Chinese inflation numbers. At the time of writing, these figures have not been released but a fall to 4.7% is the general consensus after another stellar set of trade figures with 34.9% export growth on the year and 37.7% import growth. There is a real sense around the markets that the Chinese authorities may act this weekend to slow growth and inflation. If the rumours are true and the Peoples Bank of China or the Finance Ministry act over the weekend, then we can expect a sharp move in the value of the Australasian dollars. Anything which weakens demand for imports in China will weaken these currencies. This is the perfect weekend to place an automated order to try to buy some cheap Aussie and Kiwi Dollars. Speak with your Halo Financial consultant about your plans and a suitable target. The New Zealand Dollar is perhaps the most vulnerable after NZ exports dropped in the third quarter of the year and meat exports fell by 19%, an 8 year low. That export decline is going to be felt in the domestic economy so the NZ Dollar is likely to weaken further from its current levels although there is significant resistance to that at NZ$2.11 against the Pound.
I have not yet mentioned the US Dollar because there is very little to mention really. There was no market moving data release yesterday but investors are still buying into the US treasury certificates and that is underpinning the value of the US Dollar. This afternoon brings a wave of significant data with the trade balance and University of Michigan consumer sentiment report being the highlights. We don’t expect any major change in the trade gap but news from elsewhere could well shift the US dollar around anyway.
In other news, the UK and Icelandic authorities took a step closer to resolving the repayment of funds relating to the collapse of the IceSave bank. The UK government paid out some £2.3 billion to UK savers who lost money when the bank collapsed. The repayment by Iceland to the UK exchequer will take until 2046 though. That gives time for another three cycles of boom and bust in the meantime.
And then it is the weekend; we will all be beating each other up in the Christmas shopping bonanza - or not - and perhaps we will be scanning the interweb for presents and treats - or not. Whatever you are doing at the weekend, I hope you have fun and let’s catch up again on Monday. In the meantime, if you have any overdue library books and are thinking, well maybe I’ll drop it back in there sometime and face the fine discussion then. Well a 95 year old American woman has probably broken the record for late return. He brought back a book that her late husband had borrowed 74 years earlier and faced a fine of $2,700. Thankfully the library waived the fine in return for a small donation. If that had been the UK, I have a feeling riot police and several armed response units would have been drafted in to control the situation while the old girl was cuffed and read her rights. Oh how times have changed.
Written by David Johnson, Director at Halo Financial