Today's Highlights
Empty desks and empty data diaries leave markets flat
Sterling holds strength despite Government debt rise
FX Market Overview
A drop in corporate tax revenues was at the centre of a sharp increase in UK government borrowing and that brought about the usual raft of ‘I told you so’ interviews and plenty of calls for an end to the austerity and a beginning of government spending. Ironically that would inevitably produce more government debt but the naysayers aren’t interested in that. The government is apparently planning a series of job creation projects but we will undoubtedly be told these have nothing to do with the debt data. We will believe that of course. Sterling slipped on the poor debt news; at least it did against the Euro but against the US Dollar and Australasian currencies, Sterling had rather a good day.
For its part, the Euro was mixed as the various debates rage on within the Eurozone. Greece is preparing to offer more cuts; some €13.5 billion it seems, but requesting a further two years to deliver them. Spain is hoping the rumours are true and that the ECB is going to cap the yields on Italian and Spanish bonds through the fiendishly technical plan of buying shed-loads of them. (Shed loads is a technical bond market term). Germany’s Chancellor Merkel and France’s President Hollande are due to meet with the Greek Finance Minister tomorrow to discuss what to do about Greece. Michael Meister, a Christian Democrat Union leader in the German parliament has said that Greece needs to decide whether they want to stay or go. Controversially, whilst Greece is all cut, cut, cut, Spain is extending unemployment benefits, yet both countries are benefitting from Eurozone fund and both have rampant unemployment levels. Such disparities don’t help an already tense situation. The lack of UK or European data today and the sizeable number of empty trading desks in this holiday season should leave us in a sort or uneasy equilibrium for the most part.
That could well change this afternoon when US existing home sales figures are released and perhaps even more so this evening when the US Federal Reserve releases the minutes from their last Open Market Committee meeting. Is QE3 going to happen? When will interest rates start to rise again? Is the economy on track for expanding growth? None of these questions will be answered tonight but we will all be excited if we get a few clues as to the future of USA INC.
The Australian Dollar and New Zealand Dollar weakened through yesterday’s trading sessions and remain at the weaker end of their recent ranges this morning. That prompts the question of whether the bubble has burst on the excessive strength of these two in light of a Chinese slowdown and a bit of risk aversion. It’s hard to cit risk aversion when the US Dollar is not really any stronger but nervousness over the pace of Chinese raw material demand is certainly having an effect and there is a lot of talk of mining projects being delayed and postponed in Australia while China causes concern and after Japanese data showed a sharp drop in export volume. The global economy is certainly not out of the woods and we can see that nervousness played out in the value of two of the most volatile currencies, the Aussie and Kiwi Dollars.
And as the warm weather subsides in Britain, spare a thought for a poor woman in Dallas, Texas who is suing the Dallas Cowboys football team after she burned her bottom by sitting on a hot bench outside their stadium. Apparently, on a day when the temperature was 100 degrees Fahrenheit, there were no signs to state that the black marble bench was hot. Clearly, whoever forgot to put out the ‘This bench will be hot when the sun shines’ signs should be sacked.
