I was so glad I had nothing better to do than watch sport this weekend but it was hard to know what to look at next. England’s cricketers were in supreme form; especially James Anderson; outstanding. The Formula 1 race at the Hungaroring was lively although once Lewis Hamilton was out, the end result was largely inevitable but Schumacher’s frustration appears to have cost him his marbles. But the European Athletics from Barcelona was phenomenal; I cannot think of anyone who embodies the spirit of the unassuming British sportswoman better than Jessica Ennis and I learned more about distance running than I ever have before, just through listening to the snippets and pearls of wisdom from Paula Radcliffe. For the first time since we won the bid for 2012, I have stopped dreading the traffic congestion and the debt legacy and started looking forward to the London Olympics.
Before all of that though, we have to take a look at the financial markets and the end of last week was a little less volatile than many had envisaged. The US Q2 economic growth data was worse than expected but there was enough reason to be upbeat. The US Dollar is caught in between two sticks. There is an obvious urge to sell a currency when the news is bad, and when we see a growth figure of just 2.4% against analyst forecast of something more like 2.7% we have to be wary. But when we know that the Quarter 1 figure was revised upwards to 3.7% that was enough to offset US Dollar concern. So when the other figures of the day were business and consumer sentiment indices which were very upbeat, it was not surprising that the status quo was maintained.
Sterling suffered from the £14.5 billion public sector debt figure; of that there was no doubt, especially when this was a couple of billion worse than forecast and the fact that the higher debt levels put the government’s recovery plans in peril. However, the fact that VAT is set to rise in January seems to be keeping inflation at the forefront of trader’s minds and that appears to be overriding the government debt concerns. We have to wait until 18th of August before we get the minutes from the last Bank of England meeting and see whether anyone is being persuaded by Andrew Sentence’s calls for higher interest rates in the short term. I think not; especially when the governor of the Bank of England is hinting that further financial stimulus may be needed before the UK economy is out of the risk of a second phase recession.
The commodity-reliant countries are seeing the currencies trapped as well. The slowdown in China was highlighted overnight when it was revealed that manufacturing in the country slowed to its lowest level in 17 months and it must be remembered that 17 months ago we were in the midst of the worst global recession in over 70 years. That suggests imports of commodities will suffer, which doesn’t bode well for the countries that produce and export commodities and raw materials. Australia, New Zealand and Canada fall into this category along with South Africa and others. We have seen a plateauing of the currencies of these countries as local concerns are heightened by export income worries. Sadly for those in the UK importing from or migrating to these countries, Sterling hasn’t been sufficiently well supported to be able to make gains while these currencies flounder but the Pound is still testing the tops of its ranges against these currencies on an almost weekly basis so we may still see some gains here.
This week is swamped with data releases of all sorts and, being the first week of the month, it will be topped off by Friday’s US employment report which ought to show yet another worrisome fall in employment levels. Before that though, we get interest rate announcements from the UK and Eurozone as well as a raft of business data and confidence indices. Like last week, we look set to see a fair amount of volatility and we have started with a bout of US Dollar weakness. Whether that will last is open to debate but it is offering the best US Dollar buying rates in a number of months for anyone who has such a requirement.
And finally, I am sure burger and fast food companies have the fair share of complaints from people who are dissatisfied with the food but there can’t be too many who have had complaints about the contents of the till....from the person who stole it all. A thief who robbed a Wendy’s restaurant in Atlanta, Georgia only managed to get away with $586 and called the burger bar later in the evening to complain that it wasn’t enough. He was reported to have said in his second complaint call of the evening, “Next time there better be more than $586". Goodness knows what he is like when they forget the dill pickle.