Daily Currency update for SF members courtesy of Halo Financial

(Catharine Higginson) #1

I love the way news reports are prioritised; yesterday afternoon a BBC news presenter was interviewing a scientist about a claim by US researches that they have created synthetic life with a unique DNA signature and the scientist was just explaining the immensity of the significance of the achievement when the reporter interrupted him with “Sorry we’ll have to leave it there, we have breaking news; David Cameron is arriving in France on his first overseas trip since becoming prime Minister”. So man has just become God in fashioning a new life form but making sure we get to see a shot of DC shaking President Sarkozy’s hand ‘as it happens’ is apparently far more important. I’m surprised they didn’t hire a helicopter to show the event from above and add a little analysis over the slo-mo view of the handshake to enhance the significance of the event. HUMANS HAVE CREATED A NEW LIFE FORM for goodness sake. What could be more amazing than that?..if it’s true of course.

Anyway, the financial markets were far more interesting than any hand shake although I am sure there was a fair degree of fist shaking at dealing screens around the globe. On average stock markets have lost 6 percent in the last few days as Germany’s pre-emptive strike on Short sellers sent shudders around the world and as the pace of global economic recovery was brought into question by a sequence of uninspiring data releases. Inflation is certainly rising globally as the effects of higher energy prices are felt and the cost of commodities is rising. And we cannot forget that inflation data is measured year on year so these last few months have been measured against a heavy discounting period at the start of 2009 when retailers were struggling to get consumers in through the doors. However, higher inflation in conjunction with stubbornly high unemployment levels and mediocre growth is not a recipe for ‘high fives’ in government circles.

The last few days have seen a change in the commodities markets though as fear of lower demand is pulling down prices and the currencies of the countries most heavily involved in commodity exports are being sold as well. However, some of those currencies, like the Australian and New Zealand Dollars are also being sold as ‘carry trade’ investors are selling out of their higher yielding currencies and buying back into lower yielding but safer assets. The New Zealand Dollar lost 11 cents against the Pound in the last few days and the Australian Dollar lost 10 cents in the same time frame. Both have consolidated a little this morning and a fall back in some of that move would make sense as traders take profit. However, fears that the Japanese authorities may start throwing money at the markets to weaken their currency have

That means the currencies they are buying are strengthening. The US Dollar is stronger overall, the Pound has had a terrific few days and the Japanese Yen has gained 10 percent this month. The Euro is a curious one; it is either ignored and allowed to sink or traders see it get to an attractive level and it rallies for a day or so until the profit on that move is taken and it is allowed to sink again. The next few days are crucial for the Euro though. The German Parliament is voting on whether to approve Angela Markel’s promised €123 billion commitment to the €750 billion Eurozone support package and European Finance ministers are meeting to discuss this and other pressing matters. The Euro has strengthened a tad ahead of these key events and will remain quite strong as long as all goes according to plan. Without Germany’s input, the plan is about as much use as a towelling raincoat so the whole of the Eurozone will be back in the spotlight if either of Germany’s houses votes against the plan. However, there are other flies in the Eurozone ointment today with a raft of German data including the business confidence index and various purchasing managers’ indices.

From the UK, we will get business investment and public sector borrowing figures. These will be scary but the new government can blame all that on the last lot and set out their plans to tackle it again.

And then we are well and truly into the weekend. It is forecast to be a scorcher for most of the UK so please slap on the factor 40 before you venture out and reveal those pale winter legs to the wider public.