The pound starts the day on the back foot after comments this morning from Kate Barker’s replacement on the Bank of England Monetary Policy Committee. Dr Martin Weale sees “significant” risk of a double-dip recession in the UK. He feels the Bank’s GDP growth outlook for 2011 of +2.8% and 2012 of +3.2% may be too optimistic. The pound has now retraced 4% from the highs of 2-weeks ago against the USD and is now vulnerable given the emergence of negative sentiment hanging over the proud pound.
German final Q2 GDP growth this morning was unrevised from the flash estimate of +2.2%. This is the fastest rate of growth in 20-years and is good news alongside the significant decline in the household savings rate. German consumers have been criticised for their lack of spending, which is seen as holding back growth in other Eurozone countries. An improvement in consumer sentiment is encouraging German households to dust off their wallets and spend, spend, spend.
It looks like it will be several weeks before we get clarity in Australia over the election result. The parliament is “hung” and the 3 independents are in no hurry to form an alliance with Labour or the Liberal-National Coalition (LNP). Uncertainty is assured. Normally this sort of indecision would weigh on the Aussie dollar as it did on the pound back in May. LNP leader Tony Abbott (aka the budgie smuggler for his penchant for wearing Speedos) has warned not to expect a speedy process as counting has some way to go. The markets are however speculating that the recent “mining tax” which was AUD negative, may now be dropped by the incumbent government which would result in Aussie dollar strength - a cloudy picture at best.
UK July mortgage approvals fell to the lowest level in 6-months according to the British Bankers Association this morning. This is further indication that UK housing activity is slowing.
The focus this afternoon will be on US existing home sales at 15:00pm to see whether the significant deterioration in recent US housing data is abating. The expectation is for 4.67 million homes sold in July.
A burglar who robbed a bank in Roettingen, Germany would have got away with it had he not emailed two newspapers taunting police for publishing an incorrect description of him. He sent the emails not realising that email addresses can be traced. He was subsequently arrested - bright chap.