Poor global data kills the Bernanke buzz

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Markets remained sold yesterday as the effervescent qualities of Ben Bernanke’s hinting at further quantitative easing continued to be drawn out of prices. Poor global data did not help the mood either and further dampened any renewed sense of optimism.

UK GDP was revised lower (-0.3% vs. -0.2%) as a result of slips in the services industry and this means that we must be slightly more circumspect when looking at Q1, given increases in energy prices and the likely dampening effect that this will have on household spending.

Even though this figure has been revised lower, we believe that we can now attribute this to being a slight blip. Business surveys such as the recent Purchasing Manager surveys have shown the Q1 should be growing at around a 0.3/0.4% pace, although we would like to see more in the form of business investment which fell in Q4 by 3.3%. Hopefully the recent Budget will give that a prod in the right direction. The UK growth profile looks to continue to “bump along the bottom” in 2012 which no single quarter expected, by us, to print over 0.5%.

Sterling against EUR and USD on the announcement and is down 0.4% and 0.2% respectively, but reports that it had dramatically “tumbled to the canvas” were unsubstantiated.

US Durable Goods orders were also worse than expected with orders only rising by 2.2% vs. 3% expected. This was the 4th rise in 5 months but once you discount a large order of aircraft from Boeing then the figures actually look quite weak.

News from Europe was muted with some murmurs that an agreement to merge the continent’s two rescue funds may be close to coming together. A two-day meeting of EU finance ministers starts today in Copenhagen and we look to see if any communiques or statements hint at further pressures from the Iberian peninsula. Spanish bonds behaved slightly better yesterday but remain under pressure. There is a day of general strike action in Spain today as well

Sterling has dipped slightly against the euro this morning following news from Nationwide that house prices fell by 1.0% in March following a 0.4% gain in February. This was the biggest monthly fall in 2 years although it can be attributed to the removal of the stamp duty holiday.

Elsewhere we have data from Germany in the form of unemployment, which is expected to remain at 6.8%, while initial jobless claims are expected to stay around the 350k level. The final reading of US Q4 GDP is also due today with expectations that it will remain at 3.0%.

Indicative Rates Sell Buy
GBPEUR 1.1924 1.1951
GBPUSD 1.5894 1.5919
EURUSD 1.3314 1.3338
GBPJPY 131.00 131.26
GBPAUD 1.5310 1.5333
GBPNZD 1.9440 1.9470
GBPCAD 1.5863 1.5892
NZDUSD 0.8165 0.8185
GBPZAR 12.19 12.24
USDZAR 7.6676 7.6974
GBPPLN 4.9540 4.9818
EURJPY 109.72 110.00

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Poor global data kills the Bernanke buzz

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