Sterling had rather a good day yesterday in spite of the fall back to 3.4 percent in UK inflation which will diminish the pressure on the Bank of England to hike interest rates. Traders are also hopeful of a positive unemployment report today which forecasters suggest should show a fall of some 25,000 unemployment benefit claimants. We are also expecting an uptick in average earnings as full time employment increases over part time working. If all of this comes true, then Sterling could well have a good day at the office. This evening’s speeches by the governor of the Bank of England Mervyn King and the first official speech by Chancellor George Osborne will be closely watched for clues to the budget and interest rate future.
In Europe, a survey by Merrill Lynch shows investor confidence has slumped in the last two months. Two months ago, 62 percent of investors thought the EU economy would grow over the next year but in this month’s survey, that has shrunk to just 7 percent. No wonder the Russian central bank is planning to reduce its Euro reserve holdings in favour of the Canadian and Australian Dollars. That may be good news for those needing to buy Euros but is another thorn in the side of those trying to import from, invest in or migrate to Canada or Australia; both currencies are already very strong. And the Euro remains weak this morning as fears remain over whether the EU has sufficient financial resources and financial control to manage the Greek centred debt crisis.
The slowdown in Europe is likely to force the US Federal Reserve to reduce its growth forecasts when the open market committee next meets. As one of America’s largest trading partners, events in Europe are inevitably going to impact the US economy but the magnitude of any adjustment will be quite enlightening.
Overnight news that New Zealand Business confidence hit its highest level since September 2009 has stabilised the NZ Dollar but not caused it to rally significantly. In contrast, UK consumer confidence, as measured in the Nationwide survey, fell to its lowest ebb in 11 months as we approach what is expected to be a very painful budget on 22nd June. The government has made it abundantly clear that there is a lot of taxing and cutting to come and we the public are apparently preparing for the worst.
Today’s major news is the previously mentioned UK employment report plus EU inflation and US industrial production. EU inflation is not expected to have shifted much from last month’s 1.6% but there is a feeling that we will see uplift in US industrial output which, if true, is likely to boost the US Dollar. We will also get a number of speeches from members of the US Federal Reserve which are always worth analysing for evidence of the path of interest rates and expectations over the level of the TARP budget; America’s quantitative easing program.
And that is about it for the day. Yesterday’s news was understandably overshadowed by the long await release of the Bloody Sunday report which after too many years and too much money told us all most of what we already knew but, although I haven’t read the whole thing, doesn’t appear to have absolute clarity on the reasons why the Paratroopers opened fire on that fateful day. I guess everyone is hoping that, now that bombers and murderers on the terrorist side of things are out on release and possibly in positions of authority, the matter can be put to rest without further prosecution but the fear is that there are too many vested interests for that to happen which will mean further legal activity in the years ahead.
On a lighter note, Police in Boise Idaho have been baffled by a series of library books being covered in Syrup, ketchup and mayonnaise but the apprehended the culprit red handed (or sort of creamy yellow handed) as she poured mayonnaise into yet another book at the library. 74 year old joy Cassidy hasn’t given any reason for her campaign but it does give rise to all manner of condiment puns in the press. As long as it isn’t anything too saucy, I guess it’s OK.