Mixed fortunes for England’s sportsmen. In the rugby union match against Australia, the England team was one dimensional, in Formula 1 Lewis and Jensen did it again. In football....well let’s draw a veil over that one shall we. Mind you, I have worked out what went wrong; I think that playing in a stadium full of demented vuvuzela players where it sounds like you are stuck in a massive angry hornets’ nest is the audio equivalent of water-boarding. It confuses and disorientates; hence many missed passes, many misunderstandings between players and that now infamous missed save. I would urge the players to wear earplugs and communicate by hand signals in future or sue the South African authorities over Health and safety issues relating to their hearing. That should stop the infernal racket in a trice.
Anyway, away from sport, things are just as varied and volatile; Sterling had rather a good week last week but Friday’s release of poorer than expected UK data was enough to knock the Pound down a peg or two. UK industrial output fell 0.4 percent in April, in stark contrast to the market forecasts of 0.4 percent growth and manufacturing production was also 0.4 percent lower when analysts had expected growth of 0.5 percent. These poor numbers prompted talk of double dip recessions and stagflation; understandably sterling weakened but it didn’t dive because it is still considered a better bet than the Euro and the UK’s capacity to drag itself out of debt is considered better than that of the Eurozone because Britain has only one economy to worry about. That was highlighted by the fact that Sterling was at a 19 month high before the UK data and, in spite of the fall, remains quite well placed against the Euro today.
The Euro will find it hard to rally while the debt crisis continues and, in a report released this weekend, the Bank of International Settlements which is kind of a central banks’ ultimate lender, warned that about 61 percent of the exposure to European debt lies with French and German banks. The BIS drew rather alarming comparisons between the current EU debt crisis and the start of the sub-prime crisis back in 2007. That doesn’t bode well for the next few years and their comparisons will not be liked by the Germans, the French or the markets. The Euro, which had a better few days in the latter part of last week as traders took profits on the declines of the previous few days, weakened again overnight. EU finance ministers meet this week to launch a series of measures designed to prove to the world that they can and will contain the debt problems of the ‘club-Med’ states and that they can stimulate sufficient growth within the EU to counteract the negative effects of the debt crisis. We await their pitch with interest.
The US Dollar is a tad weaker this morning as a rise in share prices in the Far East signalled a rise in confidence amongst investors. That effect caused a rise in the value of the Australian and New Zealand Dollars and weakness in the traditional safe havens of the US Dollar, Japanese Yen and Swiss Franc. These are marginal moves but may be the start of something on a larger scale if the trend continues. The New Zealand Dollar strengthened in spite of poor retail sales data as last week’s interest rate hike increased the demand for the NZ Dollar owing to its increased interest rate yield in comparison with other countries. For its part, the Australian Dollar is likely to be a little muted ahead of tomorrow’s release of the minutes from the last Reserve Bank of Australia meeting. Traders will be looking for signs of whether the interest rate hiking cycle is over for now or whether the bank is nervous about China’s plans to slow their economy and thereby weaken demand for Australian exports.
This is a big week for data, especially US data. We get inflation figures on both retail and production levels, industrial production and capacity utilisation and we will hear from the head of the Federal Reserve and a number of other fed chairmen throughout the week. From the UK, we get inflation data which is forecast to show another rise; we also get retail sales, public sector debt, money supply and a speech from the Governor of the Bank of England. From Europe, we get inflation data along with employment and construction output data. As I have forecast for every one of the last 10 weeks or so, this does look like it will be very volatile. I have been proven right in every one of the last 10 weeks as well but, to be fair it isn’t a hard forecast to make with such a lot of uncertainty in the financial markets. Thankfully, all of these spikes and troughs are opportunities for either buyers or sellers.
Finally, if it is all getting too much, why not cash everything in, sell the house and all your possession, buy a Lamborghini Gallardo and clear off on a 100,000 mile road trip. That’s what American, Richard Jordan did after his girlfriend left him and he doesn’t regret a moment of it. Of course he now has a 100,000 mile Lambo which is worth a darned site less than it was a year earlier and not a lot of money left but he will hopefully recoup that with a book about his experiences or something. In fact, Lamborghini should reward him for giving their car a thorough road test. Let’s hope he does recoup his money because such total irresponsibility does deserve some kind of reward.