Daily currency update courtesy of Halo financial

(Catharine Higginson) #1

We survived 10/10/10 then. The scare mongering about computer viruses and apocalyptic disasters were all nonsense; as per the millennium bug and anything attributed to Nostradamus. So having got that out of the way, come on... own up... who has won £113 million and am I a friend of yours? Would you like me to be your friend? OK there’s no need to be like that but whoever you are, well done. The newspapers would love to take a break from talking about government spending cuts to concentrate on an instant multi-millionaire. If the press do discover who the winner is, how long do you think it will be before they track down a distant relative who is a scrounger, criminal, celebrity or deviant or perhaps all of the above?

Until they get that news, they will have to rely on anticipation of the Comprehensive Spending Review (CSR) and the fallout from the weekend’s International Monetary Fund and G20 meeting to fill column inches. Thankfully there is plenty to talk about.

Friday’s poor US employment report did nothing to help the US Dollar which had another week of losses. The loss of 95,000 jobs in the non agricultural labour market was very bad compared to the 5.000 gain that most forecasters expected but traders are selling the US Dollar more on the basis that the Federal Reserve is likely to feel impelled to increase its asset purchase budget and/or scope and/or extend the term of their quantitative easing program. There is a very good chance the markets have got it right but there may be a pause in Dollar selling today as the US, Canada and Japan have public holidays. So the market will be tight but the Euro keeps testing above $1.40 and the Pound looks like it may get above $1.60. However, Euro group President Jean-Claude Juncker remarked that he was unhappy with the Euro up at $1.40 which was an oddly candid comment. It suggests the ECB may be considering how it could weaken the Euro to assist EU exporters.

And that kind of ‘currency manipulation’ rhetoric is rife at the moment. America is, as usual, accusing China of manipulating its exchange rate to distort trade but their language is, as usual, ultra-diplomatic. We all know that the Yuan should be much stronger but we know just as well that China is not readily going to let go of such an obvious trading advantage.

In recent weeks we have seen rumours of Japan and Switzerland selling their own currencies to assist exporters but the details of what was spend are sketchy and America, which has a stated aim to increase exports by a half, needs easier access to other markets at better exchange rates if it is to achieve that goal. No wonder it was impossible to reach agreement at last Friday’s IMF meeting. The press are all over it.

Elsewhere the Australian Dollar strengthened after the governor of the Reserve Bank warned that the economy was near capacity and that further interest rate hikes were very likely. Whilst investors appear a tad too nervous for interest rate yield to be their driving force, the strength of the Australian economy and the increasing yield from an already attractive 4.5% base rate will keep the AUD strong for some time to come. Thos buying from or migrating to Australia are already having it tough but it could get tougher before it improves.

There is no market moving data today but overnight tonight brings a couple of surveys in the retail and housing sectors which could shift the Pound around. Details below. The major news stories of the week will be inflation data from the EU, UK and US and employment data from the UK. The minutes from that last Federal Reserve meeting are released tomorrow night and there are various speeches from Federal Reserve Chairmen during the week which could all be influential.

And Sir Philip Green who was drafted in by David Cameron to review Whitehall procurement is convinced that there is plenty of room to improve buying processes and reduce costs. HE says the financial controls in Whitehall are “lamentably poor”. I would hazard a guess that we all knew that which is why he got the job but changing a pattern of decades and perhaps centuries will be a tough nut. I wish him well though because my tax bill is the next thing that needs cutting.