It seems as if it has been a while since we have heard market moving information from the UK. Last night the British Chamber of Commerce revised their GDP expectations for the UK from 0.6% to 0.1% YoY. The BCC expects the UK economy to stagnate in 2012, however, a potential growth of 1.9% in 2013 is expected.
Unemployment is expected to peak at 2.9m before slowly retreating. Sterling came under pressure due to this release, falling slightly against the Euro but more aggressively against the US dollar.
George Osborne plans to continue the austerity cuts but the IMF and the BCC believe our government needs to do more to boost growth. Downside pressure remains on GBP today as our manufacturing sector is expected to contract for the first time this year.
Worries in Europe continue to mount as the Spanish banking sector is need for €184Bn to balance their sheets. There has been no conclusive solution for the government or the ECB to help bail out Spain’s four biggest banks. Adding more fuel to the fire, the EMU’s rate of inflation dropped more than expected from 2.6% to 2.4%, proving how tight consumer spending in the Eurozone is. The risk of inflation is falling dramatically, which could encourage the ECB to reduce their interest rates, causing further devaluation in the Euro.
The US posted another weekly rise in jobless claims and private sector employment also came under expectations. Chicago Manufacturing data released a drop in activity falling from 56.2 to 52.7. Concerns in the lack of ability in the world’s largest economy increased risk aversion, causing safe haven currencies to benefit across the board. With safe haven currencies benefiting the Bank of
Japan stands ready to act if the Yen continues to strengthen.
It is a great time to sell USD or buy Euros.
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