Manufacturing currency problems

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September is not usually a good month for the markets; let me just get out there and say it before anyone beats me up for being too cheery. This September is unlikely to be too different from the norm. Economic data over the past few days has galvanised belief in the markets that the Federal Reserve is more than likely to inject further capital into the US economy which has seen some assets break back into positive territory for the year but the structural issues of high debt, low growth and lower confidence remain.

If the world’s problems in 2008 were financial then the problems of today are political and “the powers that be” remain woefully slow in dealing with the world’s engine slowing. We did hear yesterday that Chancellor Merkel’s cabinet had approved changes to the European Financial Stability Fund however if the size of the fund is not improved to close to EUR2trn then it is pointless. The vote in the Bundestag is scheduled for September 29th and gives politicians more time for fiddling while the PIIGS burn.

The pound remained lacklustre yesterday after arch-dove Adam Posen called for more QE, not just from the Bank of England, but from all G7 central banks. Posen stated that “additional monetary stimulus is the last line of defence for the advanced economies today, and G7 central banks should purchase more assets if we are to have any hope of our economies ever catching up”. He went on to say that inflation should not be seen as a threat to this plan. There is something to be said for further quantitative easing and especially for those in the emerging markets. In the first round of global easing the funds did not stay in the US or UK but instead flooded into emerging markets keeping their economies afloat and enabling them to stay recession free. Without a further round of QE we could see this ‘hard landing’ in Asia that some economists have warned of.

The industry that is still the lifeblood of the emerging economy is manufacturing and we just happen to get a good few manufacturing releases today. China’s release was at the borderline between expansion and contraction once again and releases from Europe, the UK and the US are due at 09.00, 09.30 and 15.00. All are expected to provide more meat and drink for those who expect a second recessionary dip with all three likely to print a figure showing that the sector is not just slowing but actually contracting.

Following the disappointing auction from Italy on Tuesday we get a similar auction from Spain today that will be closely watched to see if the yield ticks higher. The auction starts at 09.30.

Indicative Rates Sell Buy
GBPEUR 1.1325 1.1351
GBPUSD 1.6228 1.6253
EURUSD 1.4314 1.4338
GBPJPY 124.76 125.03
GBPAUD 1.5155 1.5181
GBPNZD 1.9078 1.9106
GBPCAD 1.5862 1.5893
NZDUSD 0.8494 0.8516
GBPZAR 11.32 11.37
USDZAR 6.9634 7.0010
GBPPLN 4.6770 4.7042
EURJPY 110.05 110.32

Rates are dependent on amount transacted.

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Manufacturing currency problems

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