Filed Under Daily FX market news | Comments Off
Last week’s resolution to the Euro Zone debt crisis, which was meant to buy the single currency time, lies in tatters this morning. The Greek prime minister, George Papandreou yesterday discussed his idea for a referendum on Greece’s involvement in the Euro Zone and on accepting the latest bailout package. The Greek prime minister is taking the bet that the electorate would rather be in the Euro Zone and accept the austerity measures, than be throw to the side lines of Europe. However, if the bet backfires, then it could signal the collapse of the Euro, the possibility of mass defaults by Italy, Portugal, Ireland and Spain and a new global recession. That makes bets on the Scottish Premier League seem sensible.
Of course, there is the chance that the referendum might never happen, as Mr Papandreou’s may lose this week’s vote of confidence – meaning that he could lose his leadership, whilst meeting leaders at the G20 summit. However, this is another problem for the markets, as any new leadership may want to re-negotiate the austerity measures. The Greek prime minister is not the only Euro Zone leader under pressure – in Italy, Silvio Berlusconi faces pressure over his leadership as he tries to push austerity measures through parliament, and in Germany and France, Merkel & Sarkozy are under pressure from an electorate unhappy at having to finance the bailout packages.
The hope had been that after last week’s Euro deal, the markets may get back to looking at economic releases to drive the currency markets. However, risk sentiment is again gripping the markets, with the Euro yesterday giving up most of its recent gains in October.
In the UK yesterday, GDP for the third quarter revealed that the country had grown at a pace of 0.5% – coming in above expectations of 0.3%. However, this was partly due to one off events in the 2nd Quarter, such as the Royal Wedding and the Japanese distribution pushing growth in to the 3rd quarter. The more worrying news for the UK is that looking forward to the 4th Quarter, the UK PMI manufacturing dropped by 3.4 pts in October. This means that there is likely to be a continued absence of the export driven recovery that is essential for re-balancing growth away from the service sector, towards the manufacturing sector.
The Fed launched ‘Operation Twist’ in its September FOMC meeting, but today’s is likely to be much less exciting. US domestic data has been a bit stronger than expected as of late, which should prevent the Fed from having to increase asset purchases for now. However, they could signal a willingness to do so should the European situation deteriorate further.
What does this all mean for me? Well buying your EUR, USD, AUD or any other currency at the wrong time could cost you a fortune. There is no crystal ball but Currency UK can give you the information you need to make an informed decision.