Pressure remains on the Euro after the Irish Government splits Anglo Irish Bank in two parts - a retail deposit bank and a bad bank which will sell its assets and wind down its trading activities.
Concern over the solvency of Portugal, Italy, Ireland, Greece, Spain (PIIGS) and Belgium is as high as it was prior to the EU bail-out package. This is measured by the cost of Credit Default Swaps (CDS), the cost of insuring against default in these countries, which has surged this week.
Last night’s US Federal Reserve Beige Book was realistic in its assessment of the 12 Fed regions. “Modest” was the word used to describe the pace of economic growth in 5 regions. “Mixed” or “Deceleration” was used for the others, a clear indication that the US is cooling off.
The pound has been sold heavily after the UK July trade balance released this morning, recorded the biggest deficit on record. Because trade is a key component of growth, a shocking number like this sets a bleak outlook for the future.
The Australian August jobless rate fell to 5.1% overnight, better than economist’s 5.2% forecast. This better data raises the likelihood the Reserve Bank of Australia will hike interest rates to 4.75% this year. This was the highest monthly increase in more than 2-years when the slowdown first hit Australia.
The Canadian dollar is stronger after the Bank of Canada (BOC) raised interest rates yesterday from 0.75% to 1.00%. The accompanying statement from the BOC made no mention of a pause next month therefore another hike in interest rates this year is highly possible.
The Bank of England rate announcement this afternoon should pass without controversary. The market widely expects interest rates to stay on hold at 0.50% with no increase in Quantative Easing (QE). Two members of the Times shadow Monetary Policy Committee have voted for an increase in QE of between £30-60bn over the next 3-6 months. The minutes of this meeting will be revealed later in the month and could make interesting reading. A 3-way split in votes is now a distinct possibility.
New Zealand Q2 manufacturing activity rose a strong +3.1% to a 2-year high helping underpin the Kiwi dollar.
Authorities in Sydney, Australia have banned a circus from performing live goldfish swallowing. The goldfish is later regurgitated but animal rights groups complain it was cruel. Next it will be fishing that is banned I expect. It can’t be much fun being pulled up from the depths by your lip, grasping for breath on the floor of the boat while the hook is ripped out of your labium and then being thrown back in the water from the equivalent of a 25-story building. Swallow me whole and spit me back in the fish bowl any day.
cat (Catharine Higginson) #1