Latest economic reports indicate a poor outlook for the UK and Eurozone
The Bank of England will today release its quarterly inflation report. The Monetary Policy Committee’s (MPC) decision in October to resume its asset purchase program suggests that the report will show inflation dropping well below 2% over the next two years. This plus the fact that inflation looks to have peaked in September may lead to further asset purchases from the MPC.
It is also expected that the Governor Mervin King will slash his growth forecasts for 2011 and 2012 to 1.5% and 2.2% respectively, well below the 2.2% and 2.9% percent forecast in the August inflation report. This is due to the dire economic news since August and with still no resolution to the euro zone crisis in sight.
UK labour market data due this morning could see youth unemployment break through the politically important 1 million barrier today. A 21,000 increase in those claiming jobseekers allowance would push the claimant count rate up by 0.1pp to 5.1%. The International Labour Organization (ILO) rate is expected to edge up to 8.2%.
In the euro zone bond markets continued to rise in both the periphery and the core. 10-year Italian bond yields rose above 7% yesterday but managed to ease lower to 6.926% as London markets opened today. Following a fall in Q3 GDP, Dutch 10-year yields rose by 50bps yesterday and have continued trading around those levels this morning. We have seen widening in Spain, Portugal and Greece as well.
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.