The markets are quite unchanged due to none new information
This is the week in which our friends across the Atlantic celebrate Thanksgiving. In the current climate of economic and political uncertainty across the globe, though, it’s not clear exactly what they’ll be giving thanks for. With one in eleven people officially unemployed, house prices lower than they were a year ago and government debt totaling almost $175,000 per citizen, perhaps the only source of comfort for our American cousins is that they’re not Southern Europeans.
The Parliamentary process in Italy has been circumvented with the appointment of a technocratic Administration, whilst the ruling Socialist Party in Spain yesterday suffered its heaviest defeat in the democratic period. Their ten year bond spreads this morning have widened by 7 and 12bp respectively.
No fresh initiatives at the European level have been forthcoming over the weekend and it seems increasingly unlikely that the next Leaders’ Summit on December 8-9th will come forward with any fresh proposals for debt relief. The least bad solution might well be a combination of German support for greater ECB bond purchases accompanied by greater EU (German) supervision of national budgets. This will not play well with electorates in Spain or Italy and in the short-term will add to pressure in both debt and equity markets.
In currency markets, the only game in town is capital preservation and if this means following the herd and piling into US dollars which yield close to zero, then so be it. EUR/USD is back below 1.35 whilst GBP/USD is back below 1.57 and threatens to move lower as equity market sentiment sours further.
There are no major data releases scheduled today, other than new home sales in the United States. A 2.2% month-on-month decline is expected in October, after a 3.0% drop in September. Tomorrow in the UK brings us the latest Public sector borrowing requirement (PSBR) numbers, whilst the bank of England will release Minutes of its latest MPC meeting on Wednesday. A difficult week is in prospect.
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.