Yesterday’s markets were typical of the idle days of summer with volume particularly low and most traders more keen to catch up on the goings on at the Olympic Games than on their dealing screens. Liquidity will be low through the next couple of weeks but with the event risk towards the end of the week we cannot say that all days will be as quiet as yesterday.
The general slip lower in the economic data from the world’s leading economies continued apace however, showing that for all the bread and circuses going on in East London the global picture remains quite scary.
Confidence in the Eurozone from consumers remained at levels not seen since 2009, while members of the industrial and services sectors fell to record lows in July. The reasons are very clear for all to see and are little different from what your average man or woman are going through in the UK; cuts to government services, inflation eroding wages and a general feeling that the worst could be to come in Europe.
The money supply in the UK continued to shrink in June as well, meaning that the growth of credit cannot be counted upon to sustain the economy here in the UK. This is in part down to banks’ fears over the Eurozone crisis but also an apparent lack of demand for borrowing. Similar trends could be seen in the UK mortgage approvals figure that showed new house purchase numbers slipping from over 50k in May to 44k in June.
Markets this morning are in a slightly upbeat mood to start the session. This is still as a result of the hope and expectation that the various central banks that are due to give their latest monetary policy to the market this week will lean on the side of stimulus. As we said yesterday, we think the Fed and Bank of England will disappoint on this aspect and the key will be the ECB on Thursday.
The poor data from the Eurozone is likely to continue this morning with unemployment from Germany, Italy and the Eurozone as a whole expected to show fresh pressures in the continental jobs market. Eurozone unemployment as a whole is expected to chip higher to 11.2%, which would represent a fresh euro-area high
US data comes in the form of consumer confidence which may start to show cracks soon as the European crisis continues to weigh on wider US economic performance. We saw in last week’s Fed Beige Book that the Euro crisis is now starting to hurt US businesses and this will have an effect on their employees’ habits as well
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Indicative Rates Sell Buy
GBPEUR 1.2780 1.2810
GBPUSD 1.5692 1.5739
EURUSD 1.2263 1.2286
GBPJPY 122.73 123.01
GBPAUD 1.4928 1.4955
GBPNZD 1.9392 1.9419
GBPCAD 1.5710 1.5738
NZDUSD 0.8083 0.8106
GBPZAR 12.88 12.93
USDZAR 8.1925 8.2331
GBPPLN 5.2424 5.2751
EURJPY 95.94 96.21
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