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The phrase ‘no news is good news’ would be an accurate way of describing the last two weeks. Yesterday, the news that Silvio Berlusconi was to resign as Prime Minister of Italy was meant to lift market sentiment – instead Italian bond yields rose to 7.5%, the Euro weakened and the world’s stock markets, worried that the Euro could be coming to end, crashed.
Today, there are rumours circulating that Germany and France are considering the creation of a smaller Euro Zone, made up of the ‘core countries’ which will move to closer fiscal integration. However, Angela Merkel’s comments yesterday that structural reforms would be required ‘meaning more Europe, not less Europe’, appear to contradict these rumours.
Today the Bank of England (BoE) makes their interest rate announcement. In October the BoE announced it would be increasing its £75bn of Government Bond purchases, and although future purchases are expected, the general consensus is that the MPC is unlikely to surprise the markets today.
From the US comes a plethora of indicators and speeches this afternoon, notably with September Trade Balance, Import Price Index and Initial Jobless claims, all expected at 13.30GMT. The Bloomberg Consumer Comfort is released at 14.45GMT and 19.00GMT sees the release of October’s Monthly budget statement. The data could prove to be negative for the Dollar in the short term should they veer widely from consensus, although consensus view is of a slight edging up from the – 45.6bn posted in September as slowing global growth limits both exports and imports, and as noted by Bernanke the slow US recovery could probably curb US demand for foreign goods. More importantly there are a host of Fed speakers including Bernanke, Lockhart, Liang and Evans. Given the splits within the FOMC it will be interesting to see how far members are willing to go to ease policy further should the economy stall due to eurozone contagion.
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.