Having travelled for over 6 hours to make what is normally a 75 minute journey, and having had to spend the night at a kind friend’s house because I couldn’t get home, I can vouch for the fact that Britain doesn’t know what snow is. We had it forecast, we knew what a nightmare it caused last year but we apparently didn’t expect it to be slippery or to freeze things. Perhaps the rail and transport companies and local governments just have short term memory problems.
Anyway, the markets are all of a flutter after a day of data which was largely in line with expectations. The only real surprise was the fact that the Canadian economy declines last month. It only shrank by 0.1 percent but that was against an expectation of a small gain. The Canadian Dollar weakened on the news but the rising value of its oil exports generally redressed the balance.
The EU employment data was a tad confused. I mentioned yesterday that the German data was disappointing but in fact the unemployment level fell by 9,000 which is an oddly positive piece of news when the rest of the Eurozone appears to be in such turmoil. And the turmoil continues today with an auction of Portuguese bonds taking the centre stage. It is likely that they will be forced to pay record high interest to anyone brave enough to lend the Portuguese government money and that is a measure of just how uncertain the Eurozone’s situation really is. Ratings agency S&P placed Portugal on “watch negative” overnight which won’t help. Such is the disillusionment amongst traders and some of the public with the European situation that there is even talk of whether the EU itself has any purpose or is just a very expensive anomaly. Personally, I think something that started life as a trading coalition has become a monster of bureaucracy and an unwieldy mess. Any organisation which cannot decide where its head office should be and wastes gazillions in transporting all its staff between two centres every year probably can’t be relied upon to decide anything of any importance. But that is just my opinion and does necessarily represent the views of anyone else, alive or otherwise...blah blah...disclaimer etc.
Aaaanyway, the US Dollar is also in the news. The weakness of the Euro is flattering the USD as traders and investors steer clear of the Euro and buy safety in US treasury certificates. Last night’s testimony by the Chairman of the US Federal Reserve was notable for its blandness. He spoke of concerns about the lack of recovery in employment levels and the longer term effects that would have on the economy. The Federal Reserve’s Beige Book is due to be published this evening. That might sounds just as bland but it is in fact a useful insight into the views of the individual Fed districts. In the meantime, expect the US Dollar to remain the currency of choice amongst safety seekers and central bankers alike.
The Pound is also being flattered by the weakness in the Euro but traders remain nervous of the exposure that UK banks have to debt in the Eurozone. There are a few roadblocks in the Pound’s path C$1.64, €1.20, US$1.60, NZ$2.10, A$1.63 and there are upper limits to the pound’s progress against other currencies as well.
Fantastic PMI manufacturing data out of the UK this morning has give the pound a much needed boost. Sterling is up after the November PMI index came out at the strongest figure in 16-years, giving the Chancellor a welcome Christmas present 3-weeks early.
Overnight Australian Q3 GDP data disappointed coming out at +0.2%, half the forecasted growth figure. This was the lowest growth since the contraction in Q4 2008 and confirms the Reserve Bank of Australia is doing the right thing by not raising interest rates. AUDUSD has hit a fresh 2-month low and is now down nearly 6.5% from the move to parity a month ago.
There are stirrings of racial disharmony in Middle Earth, New Zealand after casting for the Hobbit movie has become the centre of a race row. A British hobbit hopeful with Pakistani heritage, Naz Humphreys was rejected because her skin was too dark. The casting director told Ms Humphreys that “you’ve got to look like a hobbit”. Sir Peter Jackson has since fired the casting director as no such instructions were ever given. Ms Humphreys has started a Facebook group called “Hire hobbits of all colours! Say no to hobbit racism!”