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Currency Update from Halo Financial
Voting voting voting. Welcome back after an extended UK weekend in which elections dominated the news. Changes in UK local government management were as nought compared to the changes in Greece and France. A switch from austerity to growth may force the agenda in Europe as Angela Merkel's main supporter, President Sarkozy is ousted and the Eurozone's main cause of concern, Greece looks to be on a collision course with its EU "partners". It is Victory Day in France today to celebrate the end of hostilities in Europe at the end of the 2nd World War. It doesn’t end hostilities in Europe over the debt crisis though. The euro shed more than a cent against Sterling but a surprisingly strong 2.2 percent rise in German factory orders (reported this morning) has steadied the ship a little for now. This will be a busy week for the euro without a shadow of doubt.
US payrolls rose at a disappointing pace on Friday and the US Dollar weakened as a result. The Dollar has been a little undone by a lack of encouraging data of late but we haven't seen a surge in safe haven USD buying yet. However, further Eurozone turmoil could produce that flow of investor funds into the USD, just as it appears to be happening in the Pound, so beware.
It’s interesting that Sterling has taken on something of a safe haven air amidst the EU trauma. This week’s Bank of England interest rate and QE decisions are centre stage as the dip into a 2nd recession has raised the prospects of another expansion of the money supply. I can't help thinking that if they could get banks to lend the existing QE, we would have the problem at least partially solved.
Canada's Dollar weakened last week after the US employment report disappointed the markets; suggesting a slowdown in demand for Canada’s exports. A rise in oil prices kind of stabilised matters though.
Australia's trade deficit widened to the largest gap in roughly two and a half years as imports outpaced shrinking exports. That plus the escalating EU drama saw the Australian and the New Zealand Dollars weaken across the board as the chances of further interest rate cuts in Australasia rose. As you may remember, the Reserve Bank of Australia cut its base interest rate by an aggressive 50 basis points last week so markets are braced for more but this trade data will heighten that expectation.
And if you think the suggestive lyrics to modern songs don’t have an impact on children, a 6 year old boy in Denver, Colorado would agree. He has been suspended from school for sexual harassment for singing ‘I’m sexy and I know it’, a line from a popular song, in class. I can’t help thinking a 6 year old probably knew less about what constituted sexual harassment before he was suspended than afterwards.
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Posted by: Clare Halo on 08 May 2012