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Currency Update from Halo Financial
As we await the results from local council elections across the UK, France prepares to choose a President. I started to write ‘New President’ but corrected myself. It could be that President Sarkozy keeps his job but that is looking increasingly unlikely after the Leader of the French Democratic Movement put his support behind socialist Leader Hollande. A win for Hollande has repercussions for the special relationship between France and Germany over Europe’s debt problems and the drop in French stock markets on this news tells you the market knows it. Next week will be an interesting one for the Eurozone.
This week hasn’t been without drama either, although yesterday’s European Central Bank meeting went with expectations. The ECB left the base rate on hold and did the same with the level of quantitative easing budgets. There wasn’t a lot to be gleaned from Mr Draghi’s comments at the press conference other than that the ECB is watching the market closely. The Spanish Economy Minister confirmed what was a rumour the day before; that toxic property assets owned by Spanish banks are to be voluntarily placed into a single liquidation fund to help clean up the banks’ balance sheets. It looks like the equivalent of lifting the corner of the carpet and sweeping the dust under there to be found by some other poor so and so at a later date but what do I know about economics.
There was a lot going on across the other side of the Atlantic; speeches from Federal Reserve members came thick and fast. Messers Plosser, Williams and Lockhart all grabbed a microphone but there were no real surprises. All agreed that, with the current state of the US economy there is no need for further QE at this stage and two warned that interest rates would have to start rising when the economy started to heat up a little. The ISM service sector business sentiment index helped the view that the US economy is moving in the right direction and weekly fresh jobless claims fell 27,000 last week; the best result for 3 months. All eyes now turn to today’s release of the April employment report which is forecast to continue in that positive vein. If it does, then we may see further US Dollar strength but perhaps not against Sterling which is doing rather well across the board.
In spite of a weaker than expected Service sector Purchasing Managers Index yesterday, the Pound ended the day on a high and could well break through some of these stubborn resistance levels either before the long UK weekend or after it. That could even happen during the long break for the UK because most of the rest of the world will be trading while we soak up the rain in Britain on Monday. When compared to the Eurozone, the UK economy is almost a haven of Zen-like calm and that appears to be the overriding factor in Sterling’s strength. A number of reports have cited UK gilts and property investments as being a large part of the lure but it would seem that weird paintings are also attractive investments after ‘The Scream’ reached a record £74 million at auction in London yesterday.
Aside from the US employment numbers, we also get Eurozone retail sales figures today. Anecdotally, they ought to be dreadful but they have been known to throw up some bizarre results so nothing is certain.
Once that is all over, those in the UK can scoot off for a well earned three day break. We have an odd attitude to public holidays in the UK; we take May Day on a day other than May 1st, we don’t bother to take our Patron Saint’s day as a holiday at all and we mourn our war dead not on Armistice Day as most of the rest of the world does, but on a convenient Sunday nearby. It’s all a bit woosy isn’t it. Have a great weekend though.
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Posted by: Clare Halo on 04 May 2012