EUR falls USD rises
Well it seems no amount of money, bailout, assistance, aid or otherwise can calm ‘irrational’ markets (as was the cry of Eurozone leaders) once sentiment really begins to gather momentum. The whirlwind of the European debt crisis has moved beyond the battered trio of Ireland, Portugal and Spain, as spreads on Italian and Portuguese bonds jumped to a post EMU high, raising concerns that the crisis is in danger of becoming almost systemic. The worst single day in Mediterranean markets since the launch of monetary union has seen the Euro drop a further two cents against the Dollar and around a cent and a half against Sterling. Markets will be paying close attention to ECB President Trichet before EU parliament today. With most rhetoric coming thick and fast from political figures aver the last couple of weeks, today and Thursday’s ECB meeting will be interesting to see what the monetary authorities are thinking. release
Though continuing gains against the Euro yesterday, Sterling has also lost significant ground against the Dollar after the surge seen at the start of the month post QE2. As the EU crisis has deepened the Dollar’s safe haven attraction has really come back to the fore in explaining the dynamics of the market in recent weeks. The pound took a further slump as the European Commission’s business & consumer survey showed consumer confidence in the UK falling to an 18 month low in November, with individuals’ it seems, increasingly concerned about the impact of government spending cuts, and wider economic concerns as a whole.
With no data of note released for the UK today, the US dominates the data scene on their return after the Thanksgiving holiday. For the EU, employment change figures have come in showing a smaller decline in employment than expected (though it’ll take more than this to give the Euro any strength), whilst we also get an estimate of CPI for the Eurozone for the month of November. US data is released on house prices, consumer confidence and industrial activity. The market is looking for a 0.4% fall in the September Case-Shiller home price index, but a larger fall remains distinctly possible. With the volume of sales still falling, further declines over the rest of the course of the year are certainly possible, with any stabilisation in prices only likely after the spring, should sales start to increase. November consumer confidence on the other hand should be boosted as a reaction to rising equity prices throughout this period. However, the near-term outlook will be driven by the direction of the labour market. On that basis, Friday’s payrolls report will be a more important indicator than today’s backward looking data. Finally, industrial activity is expected to remain at a reasonable pace, though this data will likely be more useful as a preliminary indication of tomorrow’s ISM manufacturing.