Friday, May 30, 2008

Sorry - but why is the UK so doom and gloom?

Hi all

Sorry for not updating the blog over the last few days but I have been out and about looking at Spain and the Euro Zone first hand (more enjoying the beach and local beers if the truth be told).

But I did still discover Spain is still very cheap compared to the UK - a Seafood dinner and drinks is still only £25-30 for a family of four instead of £25 per head, housing prices affordable and a slowing economy to boot - but are the Spanish worried? No - only the expat estate agents!

So why the doom and gloom in the UK economy? House prices only going up 2.7% this year?

Personally I think we have talked ourselves into a mini recession and I blame the UK press - nothing sells like bad news! Inflation is low, (I know petrol is expensive but if the UK Government cut the taxes/duty instead of thinking its xmas it would help), Houses are more affordable, and summer is here - so chin up - we all cant be that down beat!

Thursday, May 22, 2008

The British pound extended its gains on the combination of broad dollar weakness

The British pound extended its gains on the combination of broad dollar weakness and inflation fears. The Bank of England released the minutes from their monetary policy meeting earlier this month and according to the report, fears of inflation will keep the central bank on hold for the foreseeable future. Eight out of the nine members voted in favor of the decision to keep interest rates unchanged with the dissenter favoring a rate cut. With a strict mandate to focus on inflation and two members already voting to keep rates unchanged at the meeting prior, the near unanimous voting record was not all that surprising. Although the need to focus on inflation and the problems with price pressures is a sentiment shared by all of the MPC members, the internal outlook for growth varied.

FOMC Minutes Unlikely To Help The Dollar

FOMC Minutes Unlikely To Help The Dollar

The U.S. Federal Reserve Open Market Committee's minutes, to be published later today, are unlikely to bring the dollar the support many expect.

On the contrary, they could remind the market that inflation fears within the Federal Reserve aren't so high and that expectations of U.S. rate hikes may have got ahead of themselves.

"We still doubt that the Fed has finished cutting rates and that market expectations for rate hikes at the end of 2008 are extremely unrealistic," said Rob Carnell, chief international economist with ING Financial Markets in London.

Suggestions that the U.S. central bank may be more concerned about price pressures, rather than an economic slowdown, and that its next move on rates is more likely to be up than down, rose over the last week or two as leading Fed officials repeatedly pointed to rising inflation risks.

Monday, May 19, 2008

Trichet wtill worried by Credit Crunch

Trichet earlier talking of the challenging economic climate, and price stability as the best way to endure employment growth. He described the credit crunch as ongoing and very significant.

ECB's TRICHET is again talking price stabilityin the Euro Zone.

ECB's TRICHET is again talking price stabilityin the Euro Zone.

In a BBC interview Trichet said price stability, and CB credibility in delivering price stability, is the best way to sustain economic growth and employment. Trichet warned that the global economy was experiencing an ongoing and 'very significant' market correction. He said policy makers must avoid the mistakes of the 1970s, and CBs must stick to their long-term price stability mandate.

Friday, May 16, 2008

Euro lacks direction as Traders dont know what to do

Euro traders are looking for a fresh direction. Since the beginning of the month, the currency has been trapped within a relatively tight trading range as rising inflation meets weakening economic data. ECB President Trichet lent his weight to the debate last week when he confirmed the central bank’s focus on inflation. Although this has helped the Euro carve out a near term bottom, the tables have recently turned, leaving traders confused about where the Euro is headed next. Commodity prices have tumbled with oil prices off its highs and rice prices declining for the fourth day in a row. On the other hand, Eurozone economic data has been improving with growth in France and Germany rising more than expected in the first quarter. Strong consumer spending and rising trade balances have helped to spur growth in the first 3 months of the year, but it is important to remember that these numbers are backward looking, which is part of the reason why the Euro was unable to hold onto its gains following the report. The Eurozone trade balance is due for release tomorrow along with Swiss retail sales. The Swiss franc looks particularly bearish against the Japanese Yen which correlates with the market’s forecast for weaker consumer spending.

Is the Sell-off in the British Pound Over?

The British pound has finally stabilized after gradually trending lower since the beginning of the month. Coincidently, the currency’s pair’s intraday low was exactly the same price as the low reached on February 20th, leading some technical traders to call the latest recovery a double bottom. Fundamentally, there was no UK data released yesterday and none expected today, which means that there is no major news to drive the British pound lower. The US data on the other hand could drive the dollar lower which coincides with the potential for a Pound US Dollar rally. However even though the currency pair could very well extend its gains over the next 24 hours, the British pound remains vulnerable to further losses especially if the housing market deteriorates further.

Thursday, May 15, 2008

New Zealand Tax Cuts

New Zealand Government will give some relief to households from higher costs and deliver promised tax cuts according to Fin Min Cullen. But they will not be large because if concerns over adding to inflation and an expected drop in tax revenue from a slowing economy.

It seams a small step in improving the current housing market in New Zealand but if Expats keep buying property and the British migration continues, locals will need more help

Recession in Spain - No Chance

Bank of Spain's Ordonez sees no chance of recession in Spain this year.I personally think he is nuts as;Over 40,000 estate agents have already shut their doors, according to the realtors federation. There are 600,000 unsold homes on the market. Unemployment is rising at a rate of 90,000 a month (seasonally adjusted). UBS says country has built up cross-border liabilities of $362bn, much of it owed to German and French banks, and is facing a foreign "funding freeze".

This is also a common theme in France and Italy so can someone please explain why the Pound is at historic lows against the Euro

Wednesday, May 14, 2008

Eurozone Economic Calendar Heats Up

Eurozone Economic Calendar Heats Up

Since the beginning of the month, the Euro vs US Dollar has been trading in a relatively tight range against the US dollar. There has been no major Eurozone economic data released so far this week, leaving the single currency at the whims of US data. Today, the Euro gave back its gains against the greenback following the dollar bullish US retail sales report. However with the economic calendar heating up for the Eurozone starting today, the region’s economic performance could once again start having its influence on the Euro. Today we have Eurozone industrial production and French consumer prices. Even though CPI could be stronger, industrial production is expected to drop as there was a similar decline in activity in France and Germany. On Thursday we are expecting Eurozone GDP and consumer prices, followed by the trade balance on Friday. Hawkish comments from ECB President Trichet cemented a near term bottom in the Euro last week. For the time being, further losses should be limited until we see a meaningful deterioration in Eurozone economic data.

UK Inflation Higher Than Expected

UK Inflation Higher Than Expected

The latest reading of UK consumer price inflation shocked markets. UK CPI rose to 3.0% in April from 2.5%. The reading had a negative effect on all European markets, as this leaves the Bank of England in a similarly tough position as the European Central Bank, with growth slowing and inflation rising. "We think it will be difficult for the (BOE's) Monetary Policy Committee to cut rates with inflation at these levels," said David Page, economist at Investec Securities in London. Today, the Bank of England will issue its inflation report, and the US will release consumer inflation figures.

So the Pound's woes continue

Juncker welcomed the Euro Rally

Eurogroup Juncker welcomed the recent dollar rally against the euro. "We are sticking to the recent statement of the G7. We have the impression that the developments we are observing in the last days are pointing in a better direction than those we have observed before."

Tuesday, May 13, 2008

IMSFX joins Technorati

Technorati Profile

Australian Bank Takeover

Westpac Banking Corp Ltd. said it will make an offer of 1.31 of its shares for each share of St George Bank Ltd., valuing Australia's fifth-largest bank about 18.6 Billion Australian Dollars. The offer by Australia's fourth-largest bank has been recommended by St. George's board.

More Euro Bad News

Trichet overnight on Italian television said that he was worried about the Euro strength. Added concerned about sudden moves in exchange rates.

Monday, May 12, 2008

Eye on Spain

Keep an eye on Spain. Over 40,000 estate agents have already shut theirdoors, according to the realtors federation. There are 600,000 unsold homeson the market. Unemployment is rising at a rate of 90,000 a month(seasonally adjusted). UBS says country has built up cross-borderliabilities of $362bn, much of it owed to German and French banks, and isfacing a foreign "funding freeze".

Euro: Trichet’s Hawkish Comments Put to the Test

Euro: Trichet’s Hawkish Comments Put to the Test

Despite signs of slowing growth, ECB President Trichet remained characteristically hawkish at the press conference following Thursday’s monetary policy decision. Next week, his hawkishness will be put to the test with GDP and industrial production reports due for release. The latest price action in the Euro suggests that the market is still skeptical of how long the ECB can maintain their current stance. Perhaps Trichet needs to see a drop in employment before he caves. In the meantime, the ECB’s hawkishness cannot be ignored. Part of the reason why the EUR/USD fell from 1.60 down to 1.5280 on Thursday was speculation that the ECB may be less hawkish. Now that they have proved otherwise, there could be some profit taking on Euro shorts. Yet it will be just a matter of time before weakening economic data forces the European Central Bank to shift their focus. By that time, the ECB could be making the first interest rate cut when the Federal Reserve is nearly done.

BOE Warns Of Two Years Of Stagflation

BOE Warns Of Two Years Of Stagflation

The Bank of England will this week admit for the first time that it is set to breach its inflation target in the coming months and warn that Britain is destined for two years of soaring costs and weak growth.

Mervyn King, the Bank's Governor, is poised to unveil new forecasts showing that the Consumer Price Index (CPI) will rise above 3 per cent over the next six months, forcing him to write a letter of explanation to the Chancellor. In a further blow to Alistair Darling's credibility, the Bank will cut its economic growth forecasts for both this year and next.

Friday, May 9, 2008

British Pound Holds Above 1.95 as Bank of England Leaves Rates at 5.00%

British Pound Holds Above 1.95 as Bank of England Leaves Rates at 5.00%

The British pound managed to hold above the 1.95 level aganist the US Dollar on Thursday as the Bank of England left rates steady at 5.00 percent. The move was in line with expectations, but given the continued deterioration in UK economic data, there had been some speculation that the Monetary Policy Committee would vote in favour of a 25bp cut. Nevertheless, the BOE tends to take a slow-and-steady approach when it comes to changing monetary policy, and given the upside risks to inflation looming from booming commodity prices, it is not entirely surprising to see that they left rates unchanged. However, when the minutes from the meeting are released on May 21, the news could be bearish for the British pound as there were likely at least one or two votes for a rate cut and widespread concerns regarding downside risks to growth.

Hawkish Outlook From ECB's Trichet Turns The Euro From Early Losses

Hawkish Outlook From ECB's Trichet Turns The Euro From Early Losses
Thursday May 8, 7:08 pm ET By John Kicklighter, Currency Analyst

Before ECB President Jean Claude Trichet would cross the wires with his persistently hawkish outlook for monetary policy, the euro was on the retreat across the board Thursday morning. The European session was dotted with disappointing German trade and factory activity data. The industrial production number for March proved to be the most discouraging with a 0.5 percent contraction that met expectations for the sharpest contraction in 11 months - helped specifically by a remarkable 12.3 percent tumble in construction activity. Aside from these indicators, top event risk was naturally the ECB rate decision. While the policy body held rates unchanged at 4.00 percent as expected, President Trichet’s public address quieted speculation of an impending dovish turn. In his remarks, the policy maker said inflation was the group’s “highest priority” and that risk was clearly to the upside. He further suggested data pointed to moderate, ongoing growth and that financial market turmoil was putting little constraint on lending with money and credit growth “still vigorous.”

Wednesday, May 7, 2008

ECB: Will Trichet Back Off From His Hawkish Bias This Week?

ECB: Will Trichet Back Off From His Hawkish Bias This Week?

Tuesday May 6, 12:50 pm ET By Terri Belkas,
Currency Analyst

The European Central Bank is widely expected to leave rates steady this week at 4.00%, but the big question for the markets is: will he remain hawkish or focus more on mounting downside risks to growth? Estimates for Euro-zone CPI during April did ease to 3.3 percent from 3.6 percent, but this is still well above the ECB’s 2 percent target, and as a result there’s little doubt ‘price stability’ will be the foremost concern for Trichet. However, if he suggests that price pressures will moderate in the near-term – as they have recently started to do – or that feeble financial market conditions and the US economic slowdown are a major threat the Euro-zone growth, the euro could actually sell-off across the majors on Thursday.

UK consumer confidence falls again to new low – Nationwide

UK consumer confidence falls again to new low – Nationwide

Consumer confidence has plunged to its lowest levels on record as the United Kingdom's economic prospects worsen, the Nationwide building society said. Nationwide's consumer confidence survey for April fell to 70, the lowest figure since polling began in May 2004, and accelerating the survey's downward trend of recent months. The figure is a sharp drop from March's 77, which was a decline of just one point from 78 in February. Analysts polled had forecast a smaller decline in April, to 75. Nationwide said consumer sentiment could worsen further in the months to come. "Food and fuel prices remain high and, with house prices no longer rising, it is unlikely that consumer confidence will pick up very quickly," said Fionnuala Earley, chief economist. "We may have to accept that confidence levels could well worsen before they get better," she added. The drop in April came despite that month's quarter-point cut in interest rates by the Bank of England, the third such reduction since December.

Tuesday, May 6, 2008

British Pound: Gear Up for Economic Releases

British Pound: Gear Up for Economic Releases

The British Pound slipped against the Euro but remained unchanged against the US dollar as the lack of economic data left investors concentrating on election news. The Labour Party suffered their worst defeat, as voters became hesitant about Gordon Brown’s ability to lead the economy out of its current slump. Brown blamed the current economic situation on the US credit crisis and deteriorating housing market, as he vowed to improve the general health of the economy. On the economic front, there were no releases yesterday, but the pace picks up today, as PMI services and Consumer Confidence figures are expected to decline, in light of the global credit crisis. Wednesday we have Industrial Production and Manufacturing Production figures should slip further, which could lead the pound lower. BoE’s rate decision on Thursday should set the tone for end of week’s trading session, as it is largely anticipated that the central bank will keep rates steady.

Oil Hits Record $120

Oil Hits Record $120

Commodities are rallying, with oil leading the way. Just today, prices surged to a record $120 per barrel. Rocketing crude prices have been a recurring theme in recent months - as stocks fell to risk aversion and the US dollar tumbled, traders were desperate for a refuge destination to protect their assets. Blossoming demand for commodity imports from emerging markets such as India and China offered a rare positive story in an otherwise shaken marketplace, attracting huge inflows of speculative capital and leading prices to balloon higher. Crude has gained 22% since January alone. Energy costs have spurred inflation, depressed consumption, and distorted trade figures in nearly every G7 economy. Just as observers were starting to grapple with the idea of oil reaching $100 per barrel, it became apparent that $200 a barrel had nearly arrived.

Friday, May 2, 2008

Will Non-Farm Payrolls Recover?

The Federal Reserve cut interest rates by 25bp Wednesday evening and hinted that they will pause when they meet again in June. In response to this shift, the market immediately priced in an 85 percent chance that interest rates will be left at 2 percent at the next two monetary policy meetings. Since then the expectations have eased slightly as traders gear up for Friday’s non-farm payrolls report. The sell-off in the US dollar following the FOMC rate decision suggests that many market participants are not necessarily convinced by the hawkish comments from the Federal Reserve. If the labour market continues to weaken, the central bank may have no choice but to pick up where they left off and only hope that slower US demand will be enough to bring down inflation. The level of non-farm payrolls in the month of April will help to determine whether the Federal Reserve will really keep interest rates unchanged in both June and August and where the US dollar is headed next.

Thursday, May 1, 2008

Bank of England signals worst is over

Bank of England signals worst is over

The bank’s twice-yearly Financial Stability Report issued on Thursday, says the credit markets “overstate the losses that will ultimately be felt by the financial system and the economy as a whole”. The view represents a big departure from its 2006 and 2007 warnings that risk was underpriced. It added that financial institutions would soon come to see that some assets now “look cheap”. The Pound was trading 1.9700 against the US Dollar and traders were happy to Buy Euros at 1.2600 against the Pound

John Gieve, deputy governor, said: “While there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually  in the coming months.”

In becoming the first big official institution to offer a cautiously optimistic outlook for the financial sector, the bank shrugs off indications of falling house prices, noting that most households have lots of equity in their homes. Figures from Nationwide Building Society on Wednesday showed the first annual fall in house prices for 12 years, with values in April 4 per cent down on their peak six months earlier and 1 per cent lower than a year earlier.