August 13, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
The Governor of the Bank of England Mervyn King presented a very down beat assessment of the UK’s growth prospects this week.
For the first time he mentioned there was an outside chance of a double dip recession during his inflationary report.
This sent the FTSE down 2.4% to 5245.21 and the pound fell for a third straight day against the Dollar down to a low of 1.5626 giving back all of last week’s gains.
In his Quarterly Inflation Report King highlighted that they are nowhere near considering an exit strategy, nowhere close to increasing interest rates and have now left the option open for renewed quantitative easing should the need arise.
This negative sentiment overshadowed the positive UK unemployment data which fell as the economy added workers at the fastest pace since 1989.
Unemployment as measured by the International Labour Organization fell 49,000 to 2.46 million in the three months up to and inclusive of June.
Employment jumped 184,000 to 29 million. Overnight sterling has shown relative strength versus the euro, moving over 1.5% against the single European currency and hit a high of 1.2182.
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Tags: Bank of England, economic data, Mervyn King, UK inflation, UK recession, unemployment | 
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July 29, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
The Governor of the Bank of England, Mervin King, warned yesterday that a continued economic recovery was still unsure and that inflation is likely to remain above the 2% target for the next year. 
King delivered a rather frank message to banks saying that their harsh treatment of corporate clients was leading to a “heartbreaking” situation in Britain’s small and medium sized business sector.
He said “It is a very tough job to build up these businesses and I do think that we need a pattern of finance that respects the need for these longer-term relationships.”
Mervyn added “They [small and medium-sized companies] may have had the same banking relationship for 60, 80 years and then suddenly out of the blue, comes a letter churned out by a computer which says that the terms of our relationship have changed.”
The bearish comments tempered Sterling slightly but that didn’t stop the Great British Pound hitting a fresh 5 month high against the USD following recent robust economic indicators and we are now trading at 1.5639 on cable.
Categories: Uncategorized | Tags: Bank of England, Mervyn King, Pounds, Sterling, UK inflation | 1 Comment »
May 19, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
Germany has banned naked short selling 
The euro came under pressure last night after Germany announced a ban on naked short selling of some securities effective immediately. Included in this bracket are the Eurozone Sovereign bonds as well as 10 of the biggest financial institutions.
The proposal was meant to calm the markets, but the Euro promptly dived below 1.22 against the greenback.
Naked short selling is when a trader sells a financial instrument, such as shares or bonds that they have not yet borrowed.
The Dow collapsed 114 points on the news as fears of a drop in funds for banks which could result in a scramble for cash as seen in the depths of the credit crunch 2 years ago.
Risk took a pounding with equities dropping, commodity prices falling and a rush to get hold of the “safe haven” Dollar.
Sterling slipped back on Tuesday as UK inflation data exceeded the central bank’s upper limit for the third time this year.
The Office of National Statistics said consumer prices rose by 3.7% in April compared to 3.4% in March, above forecasts for an increase of 3.5%. Of course, these figures require BoE Governor Mervyn King to write a letter to the new Chancellor explaining why this has arisen and what the Central Bank intends to do about it.
They are also fuelling concerns that potential monetary tightening as well as fiscal tightening may scupper the economy’s recovery following George Osborne’s comments that most of the 2010 spending cuts would be used to reduce borrowing.
King maintains his cautious tone as he continues to see “substantial” slack in the real economy.
Categories: Uncategorized | Tags: Bank of England, ECB, euros, Germany, Mervyn King, UK inflation, US Dollar | No Comments »
April 6, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
Gordon Brown has headed to Buckingham Palace to ask the Queen to dissolve parliament for a May 6 General Election.
As we have mentioned many times before, this election will be the most closely watched by the money markets for many years with most attention focused on the how any incoming Government plans to deal with the budget deficit.
All sides have already announced policies aimed at reducing the deficit but expect many more polices over the next month. Markets will closely scrutinise any declared polices and will also be looking for more details from existing proposals so expect increased volatility in Sterling pairs as markets digest the information.
After the announcement by Germany and France of a rescue package for Greece, Government debt stopped making headlines – for last week at least. The Euro continues to be weighed down by expectations of Sovereign risk of its member countries.
The Greek deputy prime minister clearly suggested that if borrowing costs for indebted countries do not decrease the next domino in the pack to topple will be Portugal. Quite how Mr. Pangalos thinks this pearl of wisdom helps any of the PIGS is not clear!
Overnight the Royal Bank of Australia has, as expected raised interest rates to 4.25%, its fifth rise in six meetings, sending the AUS Dollar higher against Sterling, which now trades at 1.64.
Categories: Uncategorized | Tags: Aus Dollar, Australian Dollar, currency converter, ECB, euros, Gordon dithering Brown, Greece, labour liars, UK inflation, UK interest rates, UK recession | No Comments »
March 2, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
After being sold aggressively across the currency markets yesterday the markets have taken a breather and we now await the next move.
The political focus with the opinion polls over the weekend indicating that the chances of a hung parliament were much higher. A hung parliament may actually prove successful, however the markets do not like uncertainty and the consensus is that a coalition government will have less political clout to push through the decisive decisions especially in relation to tough fiscal planning which is inevitable.
The Conservatives have come out of the traps today stating that protecting the AAA status is central to their plans- however some feel their proposed aggressive cuts will be detrimental to recovery.
On the other hand Labour propose to wait and cut later but waiting too long could mean that the horse has already bolted and the AAA rating could be lost. So this uncertainty and division is leading to a weaker pound.
Yes this could be good for the UK economy and for recovery but there is a fine line between a weaker pound and the loss of confidence in Sterling and the UK economy- this would lead to a sharp rise in import prices and inflationary pressure especially if commodity prices remain high- not good; this would spill into a pressure on the UK gilt markets and inevitably the UK losing the AAA rating adding yet more pressure.
So you can see the problem that uncertainty is creating. The Pound needs to get back above the psychological 1.50 level against the US Dollar.
Sterling also lost yesterday on the purchase by Prudential of AIG’s Asian business which led to further selling of GBP and buying of USD in the light of this purchase.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Categories: Uncategorized | Tags: debt consolidation, labour liars, Pound, Sterling, UK inflation, UK interest rates, Weak Sterling | No Comments »
February 16, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
UK CPI inflation rate came in at 3.1% against the expectation of 3.2% so slightly lower than expected.
However the year on year rate is +3.5% and will require a letter of explanation from Mervyn King to Alistair Darling to explain why. King has regularly banged the drum that inflation will come down as we move through 2010 and today’s data to a small extent justifies his forecasts.
However the data did not move the FX markets which have been quiet today considering the amount of market feedback. What the data does assist with is the BoE continuing with their policy of low interest rates and leaving the door open for further QE if deemed necessary.
Today European finance ministers are meeting again concerning Greece- feedback so far again is largely talk with no real details of the fundamentals of how assistance will be delivered.
The ongoing situation is leaving the markets flat as risk is held off the table until further clarity is divulged. We have seen a further expansion in the credit default rates today for Greece reflecting the lack of clarity.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Categories: Uncategorized | Tags: Bank of England, Greece, interest rates, Mervyn King, Quantitative Easing, UK inflation, UK interest rates | No Comments »
February 15, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
The UK economy is facing more redundancies, with substantial cuts expected in the public sector, a report has said.
Almost one in three public sector employers plan to shed jobs this quarter, the Chartered Institute of Personnel and Development (CIPD) said.
Its latest quarterly survey found that the jobs outlook had worsened despite the UK emerging from recession.
“The UK jobs market is still on the ropes,” the CIPD said as unemployment currently stands at 2.46 million.
The number of people out of work had been steadily rising since the summer of 2008, but saw a surprise fall in the three months to November.
The latest unemployment figures will be announced on Wednesday.
In the public sector, defence and public administration look set to be hit particularly hard.
However, there was better news from the private sector, which expects to see staff numbers grow for the first time since the start of the recession.
The CIPD’s survey also reveals that the outsourcing of jobs abroad is a concern for the employment market again.
One in 10 companies is looking to outsource jobs in 2010, with almost half of IT companies saying they would be moving jobs abroad.
India remains the most popular outsourcing destination, followed by countries in Eastern Europe.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Categories: Uncategorized | Tags: UK inflation, UK recession, unemployment, wise money | No Comments »
February 10, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
The good start for Sterling soon lost momentum following the Bank of England’s inflation report and Mervyn King’s press conference.
The markets and sterling were initially boosted following a report in Le Monde newspaper of a Germany led aid plan for Greece. The ECB did not comment on these reports but the rumour alone was enough to drive the markets higher with the USD shedding some of its recent gains along with the Yen- GBP/USD pushed through 1.5750 and GBP/EUR 1.1425.
However the markets made a quick U-turn as party pooper Mervyn King dampened the mood with a dose of reality- the key blow was the affirmation that it is far too early to conclude that no more QE needed.
This forced GBP/USD back to 1.5650 and GBP/EUR to 1.1350. Expect the “will they or wont they” that is the ECB assisting Greece to dominate the markets over the coming sessions.
In economic data from the UK earlier December Industrial production output came in stronger than expected at +0.5%. Good news for the UK economy but not significant enough to lift sterling.
Sterling is suffering at the moment as it is being sold on the fear factor. Later today we have Bernanke’s testimony to the congressional committee- this could lead to some US dollar volatility.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Categories: Uncategorized | Tags: Bank of England, Bernanke, ECB, euros, Greece, Mervyn King, Quantitative Easing, UK inflation, UK recession, Weak Sterling | No Comments »
January 20, 2010 | Posted by Dr Search- Principal Consultant at the Search Clinic
Another bright start for Sterling which continues it’s gains.
Sterling hit a 6 month high against the euro and pushed higher against the USD. The move was initiated with the acceptance and recommendation from the board of Cadbury’s on the offer by Kraft.
The Kraft offer values each Cadbury’s share at 840p and shareholders will be entitled to receive 10p per share in the form of a special dividend. Sterling gained on the back of the expected benefits from the M&A; flows of the deal.
Then at 9:30 official UK inflation data came in much better than expected- UK December CPI has come in at +0.6% month on month, +2.9% year on year, demonstrably stronger than median forecasts of +0.3%, +2.6% respectively.
This has raised the prospects for a Bank of England interest rate rise in 2010 and it certainly offers the Bank of England something to think about in early Feb.
This data also heightens the view on the UK employment data later this week- better data here could reinforce the view that the UK is firmly on the road to recovery.
The Pound hit a high of 1.1455 against the euro and 1.6457 against the USD before falling back from the highs- Mervyn King is due to speak later and the market will expect a cautious approach which could take the edge off sterling- we will see later..
The Euro is under pressure this morning as the fallout in Greece continues to undermine the single currency and in addition the German ZEW came in weaker than expected for the third month in a row. The euro is closing in on key technical levels against the USD and the EUR with EUR/USD close to breaking below 1.4275 and GBP/EUR targeting 1.15.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Categories: Uncategorized | Tags: Bank of England, euros, eurozone, Greece, interest rates, Sterling, UK inflation, UK interest rates | No Comments »
December 9, 2009 | Posted by Dr Search- Principal Consultant at the Search Clinic
All eyes will fall today on Alistair Darling’s pre-Budget report.
For the Foreign exchange markets close attention will be paid to the repayment of debt and growth forecasts along with the potential for a tax on UK bankers’ bonuses.
All will be revealed later but the sentiment seems to be turning sterling negative as sterling has been sold off this morning against the Yen and USD. Today we have seen the UK October trade deficit widen to 7.1 billion against the forecast of 6.85 billion- not good timing for the chancellor as he looks to solve this ever growing issue.
Other data from the UK confirms that whilst UK consumer confidence has come in positive, UK manufacturing output has stagnated in October and the British Chambers of Commerce downwardly revised its GDP expectations for 2009 and 2010.
They are forecasting a 4.6% decline for GDP in 2009 and the 2010 outlook was lowered to 1% from 1.1%- it will be interesting to see how these forecasts align with that of Alistair Darlings later.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Categories: Uncategorized | Tags: credit crunch, UK inflation, UK interest rates, UK recession, wise money | No Comments »
