It is stressful enough being an England football fan without blind referees and touch judges and without such lacklustre performances. Sad to say Germany deserved to win the game and all the vuvuzelas in Africa can’t change the fact that we are out of the World Cup. Hats off to the chap who lives opposite my railway station and who has been flying a huge St Georges Cross for the last few weeks. Seeing it lowered to half mast this morning was really quite moving. Whoever has got Brazil, Argentina or Germany in their office sweep looks set to make a few quid. So with football out of the way, we can concentrate on something that tends to disappoint in equal measure; British tennis or something that tends to yoyo and that is English Cricket. Oh and the Hamilton/Button duo continues to impress even if they were also beaten by a German at the weekend.
In the financial markets, the heads of the 20 wealthiest nations met in Canada to discuss football, the fight to emerge from recession, Afghanistan, oil in the Gulf of Mexico and a whole host of other matters. Agreement in these meetings is always tricky; if you get 20 of your friends together and try to get agreement on where to eat for lunch it is tricky enough. Imagine getting to a conclusion on quantitative easing levels or world peace and the problems of vested interests get in the way at every turn. So what tends to happen is that they all agree to something or even a series of things, make the announcement in a joint communiqué and then go away to forget the accord. I suspect that is precisely what will happen with the resolve to get troops out of Afghanistan in 5 years and the commitment to cut budget deficits in half within three years. But for now, we are all supposed to be mightily impressed that they speak as one even though the communiqué has more caveats and exceptions than there are discarded car window flags across England.
The markets took these announcements in their stride and this morning’s exchange rate levels remain largely as they were on Friday afternoon. Perhaps if the G20 had persuaded China to stop ignoring copyright or to strengthen their currency by 10 percent and not just the measly 0.5 percent, this would be different.
A quick round robin shows the Euro in a holding pattern at the weaker end of its range against the Pound but mid range against the US Dollar. Whatever Angela Merkel and Nicholas Sarkozy spoke about over the weekend, the Eurozone is still facing significant short term risk from debt levels across the region and from the threat of credit ratings downgrades. A number of investors and institutions are warning of the potential for longer term collapse of the Euro itself and that is clearly not what the heads of these countries want to hear.
The Pound is in rather good form against most of the Western Hemisphere currencies; it is at a 19 month high against the Euro and pushed back above $1.50 against the US currency before Friday’s close of business, but it is struggling still against the likes of the Australian, New Zealand and Canadian Dollars; relatively strong commodity prices are keeping these well supported. However, Sterling is seen as being different from other European economies in that Britain can determine its own financial future without the constraints of EU dictum and the new government’s plans to cut debt and spending levels are generally seen in a positive light by market participants.
The US Dollar is the bellwether for all markets at the moment. Positive news; whether from the US or elsewhere, tends to weaken the US Dollar as investors sally forth from the safety of US government debt certificates and enter into higher risk investments elsewhere. If the news is bad enough to make investors nervous, even if that news emanates from America, the USD strengthens on the increased buying of US treasuries. This week will be a big test for the USD as Friday brings the US employment data for June. It’s the first chance we have to see how America performed in this month so it will be keenly watched, as will today’s US personal income and expenditure data which is closely monitored by the US Federal Reserve for signs of looming inflationary pressure.
The other data realises of note for this week are the final calculation of the Quarter 1 UK economic growth data and UK mortgage data from the Bank of England, we will also get German inflation and a number of business and consumer confidence indices.
I hope yours is a good week; that you are not too depressed over the appalling football performance, not too sun burned and not too hung over from all that outdoor drinking after a terrific weekend of weather. The thing that cheered me up immensely was seeing Stevie Wonder headline at Glastonbury. I wasn’t there, although for once in my life (geddit) I would love to have been there because I thought he was spectacularly good. Hearing a crowd of people, young enough to be his grandchildren, singing along with every word was fantastic. I am very jealous of you if you were there.