Bank of England cuts by 50 basis points

The furore grows over whether the European Central Bank is reading the same news as the rest of Europe. They opted to leave the cost of borrowing at 2.0% yesterday in spite of the fastest slowdown in Germany and Spain in centuries. Signs of protectionism are appearing across Europe in contravention of EU rules but that is properly expected when the ECB is so slow to react and unable to inject cash into the economy because that is also against EU rules. The ECB did hint that they would cut interest rates in March but ‘Big Deal!’ was the response from traders. All this angst is weakening the Euro to the sounds of ‘Hurrah’ from those who need to move funds into Europe for property investment, migration or import reasons.

Sterling on the other hand benefitted from yet another 50 basis point cut from the Bank of England which brings the cost of borrowing in the UK down to the lowest level in centuries and virtually removes any yield available from saved cash. Seeing pro-action from the BoE is clearly improving traders’ view of the UK economy and the Pound is testing the top of all its trading ranges. That is great news in as much as the current exchange rates are very attractive but it may be bad news in that this may be the best we see for a few weeks at least. Sterling sellers are well advised to look at their requirements today.

Yesterday also brought a welcome rally in stock prices; well if you are getting nothing out of your cash savings, buying into some very cheap shares is an option. The rally was boosted by growing optimism that President Obama is getting his act together on plans for economic recovery. Mind you, traders and analysts are fickle beasts

And that brings me to the matter of today’s data which is all about the US employment numbers. To be fair, we did start with UK industrial production falling by 9.4% in the year to December, the worst since 1981, and that immediately knocked the Pound off the pedestal it has occupied for the last few days. . So the US employment data is likely to show at least 500,000 job losses and that can’t be good for President Obama’s plans.

And finally, I loved the story of the American techies who are hacking into electronic roadwork signs to change the messages. Messages such as “Daily lane closures due to zombies”, and “Raptors ahead” have been seen by motorists in Illinois and Texas. Now I know it is naughty to mess with such important things but that would brighten up the grind of sitting in traffic queues wouldn’t it.

And absolutely and definitely finally, Jeremy Clarkson, a man who laughs in the face of controversy, is in hot water for calling Gordon Brown and “lying”… “one-eyed Scottish idiot”. That’ll cause some controversy but after the Carol Thatcher debacle, it’s a good thing Clarkson didn’t call him a cabbage patch doll or something equally demeaning.

Have a great weekend everyone even if you are snowed in.
For some free, impartial advice about getting the best exchange rate for your money – feel free to get in touch with us via this form:

Name (required)

Email (required)

Website

Text only. No markup allowed.

UK and EU interest rate decisions awaited

I’m starting to wonder what the purpose is of the Treasury Select Committee. Yesterday they invited several business journalists including the BBC’s ubiquitous Robert Peston and straight talking Jeff Randall to explain whether they were responsible for the collapse of the UK economy. Perhaps, rather than looking for blame amongst the observers, they should be a little more inward looking and concentrate on the errant law makers who benefitted from the boom and those who failed to regulate the banks correctly. Or they could just change their name to the Treasury Scapegoat Seeking Committee and be done with it.

We had good news yesterday. Yes I did say GOOD news as the UK Purchasing Managers Index rose to 42.5 from 40.3. This is just the services sector so it would be nice if the manufacturing sector data was positive as well but that combined with some success in the corporate bond issuance area boosted Sterling on the day. However, this was just a small oasis of positive data amidst the Nationwide UK consumer confidence index which hit its lowest level since 2004 and the usual round of doom and mirthless news reporting.

The US data was just as mixed with the ADP measure of private employment payrolls falling by a worse than expected 522,000 whilst the Institute of Supply Managers service sector index rose to 42.9 when it was expected to be as bad as 39.0. This painted a far too uncertain picture to make the US Dollar either advance or decline. However, overnight news that New Zealand’s unemployment rate improved slightly to 4.6% from 4.7% was greeted with a flurry of Kiwi Dollar buying and the Sterling – NZ Dollar exchange rate is slightly lower this morning.

This morning started with an HBOS house price index which was largely in line with all the other gazillion house price surveys we see in a month so that should trouble the scorers. However, the expectation of an interest rate reduction in Britain will keep Sterling traders in abeyance until noon. A 50 basis point cut is the most likely scenario so look out for any deviation from this because that would herald sterling strength or weakness dependent on whether they cut by less or more respectively.

That will be closely followed by the interest rate decision from the European Central Bank at 12.45 pm UK time. Most forecasters are expecting no change from the ECB but there is a real chance they will finally heed the calls from around the Eurozone and cut by 25 or even 50 basis points in a surprise move. In normal course of events, that would generally weaken the Euro but beware of Euro strength is traders feel the ECB is finally ‘on message’ as the politicians so quaintly put it.

This afternoon will be lively for these reasons as well as US data which will include the weekly jobless claims figures as well as factory orders and productivity data. It is likely that these numbers will be as inconclusive as all the other data we have seen this week, so predicting the next direction for the USA Dollar is a coin flipping exercise. However, the fact that the data releases are becoming more mixed and less laden with morbidity does make you wonder whether we are reaching not the start of the upturn, nor even the end of the downturn, but maybe just maybe we are somewhere near the beginning of the end of the downturn. Less like the green shoots of recovery and more like the end of the ploughing season.

And finally, well done Phillip Connor who made his son write an apology and deliver it in person to the corner shop owner from whom he had stolen some sweets. And well done to the Police who suggested this course of action rather than tarnish the child with a criminal record for something that could be put right simply and, I believe far more effectively by the boy confronting his own error. We should be wary though; logic and clear thinking could catch on if we are not careful.

For some free, impartial advice about getting the best exchange rate for your money – feel free to get in touch with us via this form:

Name (required)

Email (required)

Website

Text only. No markup allowed.

Spanish unemployment rockets

We have an interesting juxtaposition; British authorities refuse to condemn UK employers for apparently excluding British workers for fear of breeching EU rules but at the same time, the Spanish government which saw its unemployment level shoot up by a record 200,000 to 14.4% in January, is mounting a ‘Made in Spain’ campaign urging Spaniards not to buy imports in blatant breech of EU protocol in order to protect Spanish manufacturing and agriculture. Personally, I think Spain has the right idea but I don’t want to say so for fear of flouting an EU regulation of some sort. And anyway, the Spanish decision only mirrors what President Obama’s team is mooting so we are slowly edging towards local protectionism which is probably inevitable when it is the locals who elect the politicians making the decisions.

As for the financial markets, well the Euro actually strengthened in spite of the dire Spanish data and in spite of another slide in German Retail Sales. The Euro’s gains weren’t dramatic but the fact that German retail sales declined at a slightly slower pace in January than they did in December was seen as positive. Is that a case of traders being thankful for small mercies? Probably.

Yesterday’s other data included an improved Purchasing managers Index from the US construction sector and an improvement in US pending home sales, both of which helped to strengthen the US Dollar.

From downunder, we heard that the Australian authorities are pumping another A$ 42 billion into the domestic economy which, combined with the 1.0% cut in Australian interest rates which takes effect today, could well slow the decline in the Aussie economy. In other Aussie news, retail sales shot up by 3.8% in December but building approvals dropped by 2.9 percent. It’s a mixed story but the markets certainly seemed to like the news overall as they bought the Australian Dollar throughout the day.

Today brings more news from Australasia with New Zealand unemployment figures and some employment data from the US as well as Eurozone services sector purchasing manager’s indices. None of this is likely to be very influential on traders who are principally focussed on tomorrow’s twin interest rate decisions from the Bank of England and the European Central Bank and on Friday’s official employment report.

However, the markets remain lively and volatile as each day brings another new twist in the recession story. Brits are wondering more about the twists and turns in the travel story as the snow alters rail and road plans by the minute. It is sad that Britain has become a laughing stock amongst those countries which regularly cope with heavy snow but we only get this kind of weather four or five times a century. We don’t get as much practice as some do. Consequently, when we do get decent snow, our authorities do a fantastic ‘rabbit-in-a-headlight’ impression.

And finally, anyone who has ever been involved in an access dispute with a neighbour will feel for 70 year old Eugen Dumitrescu from Pitesti in Romania who, after falling out with his downstairs neighbour, has been told by a judge that he has no right of access to his flat via the internal staircase which is owned by the neighbour. He must now scale a ladder to get to his flat and is fed up with being reported as a burglar and being asked if he is a window cleaner. He is appealing the decision. Maybe he is hoping the judge will climb down. Sorry…couldn’t resist it.

For some free, impartial advice about getting the best exchange rate for your money – feel free to get in touch with us via this form:

Name (required)

Email (required)

Website

Text only. No markup allowed.

Australian interest rates cut by 1%

Yesterday was probably quite challenging for everyone in the UK. Those who managed to make it to their desks were covering for all their colleagues who couldn’t and those who couldn’t get to the office were left with that guilty feeling while their colleagues did all the work.  There is another group; the one who just said ‘hang it all’ and went tobogganing instead; shame on you naughty people.

Those who managed to get to their dealing desks in the financial markets were very busy indeed with lively markets and confirmation that US consumers are doing what comes naturally when times are tough, saving rather than spending their cash.   It is something they haven’t been doing enough for decades and that is partly the reason the US is in such a mess but just when the US authorities need consumers to ….well…consume, they are doing the opposite. Hence Macy’s is laying off 7,000 staff; joining many other retailers who are also reducing their wages bills. 

Nevertheless, the US Dollar managed to strengthen through the day as traders still believe the light at the end of the US economic tunnel is nearer than that in other economies. We will have to wait until later in the week to see if the Pound will benefit from another Bank of England interest rate cut and whether the European Central Bank has come to its senses and decided to further reduce the cost of borrowing across the Eurozone.

And overnight news that Australian interest rates have been cut by 1.0% was greeted initially with Australian Dollar weakness but now it is regaining some strength as it is seen as quite a positive move.

Today is light on data but heavy on ice and snow in the UK. We do get US producer prices indices which should, by rights, be pretty awful and we did get German retail sales data 1st thing this morning which showed the drop in employment levels had markedly worsened consumer spending. The Euro remained on the back foot.

However,. The rest of the week is full of important events like the UK and EU interest rate decisions and the US employment data. It will be lively and volatility is assured. As they say, ‘the only certainty is uncertainty’ and that could never have been more apt than right now.

 

National Interest Rates

Country Central Bank Next Meeting Last Change Current Interest Rate Australia Reserve Bank of Australia 03 Mar 2009 03 Feb 2009 3.25% Canada Bank of Canada 03 Mar 2009 20 Jan 2009 1.00% Eurozone European Central Bank 05 Feb 2009 15 Jan 2009 2.00% Japan Bank of Japan 19 Feb 2009 19 Dec 2008 0.10% New Zealand Reserve Bank of New Zealand 12 Mar 2009 29 Jan 2009 3.50% South Africa South African Reserve Bank 14 May 2009 12 Dec 2008 11.50% Switzerland Swiss National Bank 12 Mar 2009 11 Dec 2008 0.50% United Kingdom Bank of England 05 Feb 2009 08 Jan 2009 1.50% United States Federal Reserve Bank 17 Mar 2009 16 Dec 2008 0.50%

 For some free, impartial advice about getting the best exchange rate for your money – feel free to get in touch with us via this form:

Name (required)

Email (required)

Website

Text only. No markup allowed.

 

 

 

 

 

 

 

Australian Interest rate cut expected

When it snows in Britain it is so pretty. Pretty well impossible to get anywhere, pretty pathetic how local authorities cope and pretty frustrating when you can’t get to your office. So I am writing this surrounded by snow, unable to catch a train and stranded by impassable roads. Global warming, where are you?

As for the markets, well last week produced a fairly robust turnaround in the Pound’s fortunes after improving reports from various banks and as traders started to see the problems within the Eurozone and turned their attention to selling the Euro. However, that wasn’t the whole story and the Pound managed to improve its purchasing power against the Australasian currencies as well. 

However, Friday’s US Gross Domestic Product (economic growth) data showed a far slower decline in the US economy than most had envisaged. That boosted the US Dollar, which is stronger against most currencies this morning.

This week is full of reasons to invest, disinvest and or run around like headless chickens, as has been the latest market craze. Oh those traders; they’re just crazy bonkers. We will almost certainly see a 75 basis point cut in interest rates from the Reserve Bank of Australia and the Aussie Dollar has already weakened ahead of that announcement. A 1% cut would further weaken it and orders are now sensibly being placed around the resistance level of A$ 2.29.

We also expect UK interest rates to be cut on Thursday. The Bank of England are almost certain to cut another 50 basis points off the cost of UK borrowing, bringing rates to another new low and hopefully restoring some semblance of faith in the UK economy. I know that is ‘a big ask’ as they say but with every other country undergoing the same level of slowdown, it is only the massive debt of the UK economy that is singling us out. But what’s a bit of debt between friends eh! Th UK authorities could take a tip from the new US President who is making sure the US banks have to start lending as a caveat to the injection of funds into their balance sheets.

By the way, the European Central Bank will make an interest rate announcement on Thursday as well. Most analysts expect them to keep the base interest rate on hold at 2.0 percent but I have a snaking suspicion that they may cut after a barrage of weak data from various countries. However, EU inflation did drop sharply last week so the bulk of market analysts might have it right but when EU member states are all whingeing about the strain that the ECB is placing on their economies, there could be a change of heart in the ECB’s ivory tower.

Whatever the outcome, I would expect further Sterling strength but this is a fickle market and nothing is for certain. I would expect Euro weakness but this is a fickle market and nothing is for certain and I would expect further snow disrupting UK travel plans but…….. Oh no that is a dead cert.

I hope your day is a little better than mine. After all it is very pretty outside isn’t it.

 

National Interest Rates

Country Central Bank Next Meeting Last Change Current Interest Rate Australia Reserve Bank of Australia 03 Feb 2009 03 Dec 2008 4.25% Canada Bank of Canada 03 Mar 2009 20 Jan 2009 1.00% Eurozone European Central Bank 05 Feb 2009 15 Jan 2009 2.00% Japan Bank of Japan 19 Feb 2009 19 Dec 2008 0.10% New Zealand Reserve Bank of New Zealand 12 Mar 2009 29 Jan 2009 3.50% South Africa South African Reserve Bank 14 May 2009 12 Dec 2008 11.50% Switzerland Swiss National Bank 12 Mar 2009 11 Dec 2008 0.50% United Kingdom Bank of England 05 Feb 2009 08 Jan 2009 1.50% United States Federal Reserve Bank 17 Mar 2009 16 Dec 2008 0.50%

For some free, impartial advice about getting the best exchange rate for your money – feel free to get in touch with us via this form:

Name (required)

Email (required)

Website

Text only. No markup allowed.