And it’s over to the US… Political bickering isn’t merely confined to the Eurozone it seems. Lawmakers in Washington abandoned their deficit cutting effort yesterday with Republicans and Democrats failing to resolve disputes over taxes and spending. The 12 strong congressional “super committee” have now left investors and voters in the dark on how this will unfold. With November presidential and congressional elections next year we could see this continuing until 2013 with either side unlikely to offer little ground in the run up to elections. I think the next statement pretty much sums up the ‘all talk and no action’ philosophy of our ‘elected leaders’ in the western world. After failing to find a form of resolution the following was uttered “Despite our inability to bridge the committee’s significant differences, we end this process united in our belief that the nation’s fiscal crisis must be addressed and that we cannot leave it for the next generation to solve” – loosely translated to ‘We’re not budging in our view and are unwilling to give up any ground to resolve this; the nation’s fiscal crisis should be fixed however not to the detriment of our own political ambitions and wealth and that it will probably be left to the next generation to solve however we’ll all be done by then so it doesn’t really matter’. I’m being flippant of course however the delay in actually dealing with issues has become quite staggering of late with dithering now the norm.
The EUR I still maintain will be under pressure and the long term trend is still for it to continue trading lower. With comments from BOI’s Saccomanni “there is now a general consensus in Italy that reducing debt is a priority” equally pointless and about 3 months behind the curve I think the Eurozone are still miles away from realising a solution to the problem never mind implementing it. EUR/USD has been trending lower in recent sessions however it recovered to a high on Monday around the 1.3540 figure. I’d expect this to come off again with the peripheral countries problem seemingly edging their way into the core of Europe with Spain and France in the headlines, along with Italy. I’d look for this to break below the 1.35 figure in coming sessions. GBP/USD has seen a massive drop off more on USD strength than anything else with it dropping to just above the 1.56 level however we’ve seen an uptick of around 70 pips on the back of a positive opening on equity markets.
We’re down to near the lows on GBP/EUR making 1.17 seem a distant memory, yet again. If you haven’t utilised market orders before now please contact to discuss. With movements in currency markets being erratic and with moves of up to 1% not now seen as completely uncommon it’s a good strategy to take advantage of market movements and achieve the high on an intraday basis.
We have had public sector net borrowing out of the UK at 9.30am. This is expected to come in at 4.3 Billion painting a slightly better picture of the UK finances however anything worse than this will be bearish for the Pound this morning. Not too much data out of the Eurozone this morning. We have consumer confidence out of the EMU and you’d have to think that is going to go come under expectation’s however with the absurdity of markets at present I wouldn’t be overly shocked if this came in better than expectations. The markets focus this afternoon will be on the US with GDP annualised (Q3) and Gross Domestic Purchase Price Index (Q3). Following on from this we have the FOMC minutes reviewing the economic and financial conditions of the US. These minutes are keenly anticipated by the market as they are only released 8 times in a year.
If you’re a buyer of EUR and seller of GBP look at the 1.1550 level to place market orders. In terms of cable, I think we’re going to see GBP/USD trade in a range before this afternoon and we may then see some major movement on the release of the USD. Contact to discuss market orders on GBP/USD this afternoon.
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