At last, about time, thank goodness for that, third time lucky etc etc etc. Obviously I am talking about football and the fact that a team of millionaires scored a goal and managed to stop the other team from doing so. That has changed the whole course of history apparently and our footballers have gone from being abjectly abysmal to Dragon slaying demigods. But now we face our arch nemesis, ze Germans. Fire up the vuvuzela; we’re going in.
Chancellor George Osborne has pulled off an equally neat trick; in cutting spending, increasing taxes and signalling that there is more to come he has actually increased optimism about Britain’s economy amongst analysts and commentators and apparently secured the ‘triple A’ credit rating that keeps UK debt costs to a minimum. I don’t think Alistair Darling will be getting the apology he demands but I guess there had to be a downside. Sterling is stronger again this morning after it was revealed that the Bank of England Monetary Policy Committee voted 7-1 in favour of keeping interest rates on hold when they met earlier this month. The dissenter was Andrew Sentence who pressed or an interest rate hike to ward off inflationary pressures. That will lift expectations of higher yields, something that has been lacking from Sterling while the base rate has been maintained at just 0.5%. Many reports suggest the banks and other market professionals see further strength in the Pound in the months ahead. This in spite of a poor CBI retail sales report for the 1st half of June which was expected to have been boosted by World Cup enthusiasm for anything with a football or St Georges Cross on the packet. Mind you, other than the Canadian Dollar which is seen in similarly positive light, the Pound doesn’t have a lot to compete with.
For example, the US Dollar has maintained enviable levels of strength in the last couple of years as nervous international investors have bought up huge quantities of US treasuries which they see as a secure port of call during troubled economic times. However, as the global economy eases itself out of the recession, the movement of funds from these safer havens and into more attractive investments has created a perverse situation in which, even if the good news is coming from America, the US Dollar weakens. That flatters the Euro and Sterling as well as currencies like the Canadian Dollar.
The Euro remains caught in the credit rating agencies’ cross hairs as the debate over Greek and Spanish default continues. The EU appears to have bought some time with the €750 billion support package but many believe it has just delayed the inevitable and probably added to the overall cost. The man famous for shunting the Pound out of the European currency project, George Soros, has warned Germany that the policies it is pursuing on austerity and cost cutting are a threat to the entire Eurozone and has suggested they either change course or leave the Eurozone completely. It is probably not what German Chancellor, Angela Merkel will want to hear but it does keep things lively for the rest of us.
In other news, the Australian Dollar was less affected than we would have expected by the announcement of the resignation of Australian Prime Minister, Kevin Rudd. His resignation was prompted by a fall in his approval ratings and a row over proposed taxes on the mining industry and it is pretty significant stuff. This is the most dramatic change of PM in Australian history and it brought with it the first female Prime Minister as Julia Gillard takes over. The Aussie Dollar was largely unchanged although it did weaken a little against the strengthening Pound.
Yesterday ended with the US Federal Reserve’s decision to keep their base interest rate on hold. Most had expected this so the market reaction was decidedly ‘ho hum’ but today’s big news will be the US Durable goods orders which may show a slight decline after last month’s surprisingly strong reading. A measure of orders for goods expected to last more than three years is seen as a good test of business optimism and the results from this report have been improving over the last year.
Overnight tonight we will get the New Zealand import and export data which is clearly essential reading for anyone interested in whether the NZ Dollar will strengthen or weaken in the months ahead.
And then we can all start preparing for the German game. I guess there will be no irony in drinking lager, eating pretzels and scoffing hamburgers while we watch the game on Sunday. We should perhaps top this off with a slice of Black Forest Gateau and a glass of Schnapps. I myself will be sporting a stunning pair of Lederhosen for the event. Not a pretty sight I can tell you. But footballers have it easy really; at least they don’t have to play for 10 hours before they reach a result but if you are a tennis pro, then that is always a possibility. Just ask John Isner and Nicolas Mahut. I am sure they will reply if they can lift their heads enough to do so and muster the strength to move their mouths.