Posts belonging to Category IMF

UK confidence improves but the pound’s struggles continue

Can the Conservatives still emerge from the election with a greater majority? Or will the UK end up with a Labour-led coalition? As it stands the result is getting too close to call, and all the uncertainty certainly isn’t doing the pound any favours.

Can the Conservatives still emerge from the election with a greater majority? Or will the UK end up with a Labour-led coalition? As it stands the result is getting too close to call, and all the uncertainty certainly isn’t doing the pound any favours.

GBP/EUR fluctuated between €1.1543 and €1.1442, GBP/USD dropped from a high of $1.2877 to $1.2795, GBP/AUD gradually eased to AU$1.7146, GBP/NZD hit a worst level of NZ$1.8026 and GBP/CAD bottomed out at C$1.7201, down from C$1.7359.

Although a report published by analysts at JP Morgan indicated that a hung parliament could actually be good for the pound, GBP exchange rates failed to derive much benefit.



Wise Money market roundup

Although a report published by analysts at JP Morgan indicated that a hung parliament could actually be good for the pound, GBP exchange rates failed to derive much benefit.

Up until now it has been argued that an outright win for the Conservatives, which would see the party increase its majority, would be the best outcome in terms of facilitating smoother Brexit negotiations. That assumption saw the pound drop when Conservative’s lead against Labour was dramatically slashed.

Now, however, JP Morgan has asserted; ‘In the post-referendum world, all political developments need to be viewed through a Brexit prism and an argument can be made that a hung parliament which delivered or held out the prospect of a softer-Brexit coalition of the left-of-centre parties … might actually be GBP positive.’

The pound still closed Tuesday weaker in spite of this assumption, and extended some of these losses on Wednesday.

The euro did come under a bit of pressure of its own however as German inflation fell short of forecasts and rumours that Greece intends to default on upcoming bond repayments emerged.


What’s coming up money wise?

This morning’s UK reports were on the mixed side. The GfK consumer confidence index actually improved unexpectedly, rising from -7 to -5 rather than falling to -8.

The result, while in the negative range, was actually still a four-month high.

According to GfK’s Joe Staton; ‘Perhaps the real squeeze in living standards is yet to hit home. We haven’t seen any significant fall (in consumer confidence) of the kind we might expect during such periods of pre-election and pre-Brexit uncertainty.’

However, while that result surprised to the upside the Lloyds Business Barometer was far less impressive, plummeting from 47 to 27. The British Retail Consortium’s (BRC) shop price index also eased -0.4% rather than the -0.3% projected.

This mishmash of figures left the pound little changed against most the majors, although GBP/EUR did edge slightly lower in spite of Germany’s retail sales data falling short. Consumer spending in the Eurozone’s largest economy fell -0.2% on the month in April (an increase of 0.4% was expected) with the annual figure printing at -0.9% rather than 2.2%.

Later today the UK’s mortgage approvals and lending data could spark a bit of movement, but attention is likely to remain fairly focused on political developments now that the general election is within touching distance.

The Eurozone’s unemployment numbers and inflation data could give the pound a bit of respite mid-morning as inflation is expected to ease in May. If inflation does fall to 1.5% on the year it would reduce the odds of the European Central Bank (ECB) making any attempt to adjust stimulus in the near future, reducing demand for the euro.

Meanwhile, Canadian growth data is likely to impact CAD exchange rates, while USD movement could follow the release of US pending home sales numbers.

European Commission projects expansion for UK

The European Commission has projected an expansion of 1.5% for the UK after initially suggesting just a 1% growth, seemingly backing the pound for 2017.

The European Commission has projected an expansion of 1.5% for the UK after initially suggesting just a 1% growth, seemingly backing the pound for 2017.


After initial fears of Brexit causing harm to growth in the UK, they have appeared to have back tracked and now state ‘growth has yet to be affected’. 2016 ended up being positive in terms of expansion, showing that the UK was the fastest growing G7 nation. But expectations have been kept at a steady 1.2% growth for 2018. Key data out in the UK today, with Consumer Price Index expected to come in just shy of 2%, with previous figures moving to 1.6%. Consumers are slowly beginning to feel the force of inflation, which has slowly been on the rise since Q4 of 2016.

The Greek banking situation has made its way back into the press, as bailout issues arise again. The BoG Governor, Mr Stournaras has stated that Greece requires another urgent bailout. With the Greeks beating its fiscal target set by IMF officials, it would appear they could be in line for a quick fix, but would need to keep to the agreement set out previously.

Marine Le Pen likely to win first round of voting

In other news, Marine Le Pen is likely to win the first round of voting in France and she has not been shy in stating she wants France out of the EU, now commonly known as a potential ‘Frexit’. All eyes will be on the how the National Front party performs in the upcoming elections.

Focus on German GDP

Today the market will be focussing on German Gross Domestic Product (1.7% expected against 1.8% forecast) & Consumer Price Index (1.9% expected & forecast) plus Italian Gross Domestic Product (1% expected against 1% forecast) in the spotlight.

All eyes on Donald Trump

All eyes will be on Donald Trump over the next few weeks, after he stated he will be making a big announcement with regards to tax. The announcement had moved US indexes up suddenly, as investors await the breaking news. The end of the day sees Federal Reserve’s Janet Yellen speaking before a Senate Banking Panel, which could feed into market movements.

Trump tax plans excite markets

President Trump yesterday managed to excite financial markets as he announced ‘something phenomenal’ on taxes in the next two or three weeks in a meeting with US airline executives.

President Trump yesterday managed to excite financial markets as he announced ‘something phenomenal’ on taxes in in the next two or three weeks in a meeting with US airline executives.

During a press briefing later on in the day with the White House Press Secretary, Sean Spicer confirmed the package will be ‘comprehensive’ and that it will ‘address both the business side of the tax ledger as well as the individual rates’. Trump also confirmed that he is working on seeking to roll back ‘burdensome regulations’ and change the country’s ‘obsolete’ infrastructure system.

Today President Trump will meet with Japan PM Abe in Washington so the news will likely be dominated again by Trump with markets focused on the specifics that will come out of the meeting. It will be interesting to see this play out as Trump recently commented on Japan manipulating its currency to gain competitive advantage and also accusations of Japan conducting unfair business practices. Today’s meeting will be more about two-way trade and focus on a full range of economic ties with Abe planning to discuss creating jobs and building infrastructure in the US.

Wise Money market news

In Europe, Greece has once again come to the attention of the news as debt problems are again spooking markets in a year that is already proving challenging for Europe. The IMF and EU are in focus at the moment as they seem to disagree on how to tackle Greeceís debt problems. Yesterday the IMF said that in their view Greece should target a primary surplus target of 1.5% accompanied by significant debt relief which is in stark contrasts to what the EU has been pushing for: no debt relief, more austerity and a primary surplus target of 3.5%.

Data to come

On the data front, yesterday in the US there was no change to the final wholesale inventories print of +1.0% mom in December, while initial jobless claims surprisingly fell 12k last week to 234k. In Europe, Germany December trade surplus was narrower than expected Ä18.7bn (vs. Ä20.5bn expected), which reflects a decline in exports while imports remained flat during the month.

IMF raises over £250 billion- but is it enough?

The International Monetary Fund’s (IMF) has raised an additional £268 billion ($430 billion) for the pot meaning another set of support for the eurozone when it will be required.IMF raises over £250 billion- but is it enough?However, several other uncertainties persist to bother markets signifying that any rally could be short lived.

There is plenty of data and events this week including central bank decisions in the US, Japan and New Zealand.

In addition, US corporate earnings will stay under the spot light while bond auctions in the eurozone will also provide market drive.

It is doubtful that the Fed meeting tomorrow and Wednesday will incite any change in the currently low FX volatility atmosphere given that strategy settings will stay unchanged, with the bulk of FOMC members likely to look for the first alterations at the earliest in 2014.

The Fed as a result is unlikely to stir the Greenback out of its daze and if anything a fall in durable goods orders, little change in new home sales and a pull back in consumer confidence will play in support to Dollar bears over the coming week.

Even a relatively firm reading for Q1 GDP will be seen as backward looking given the slowing expected in Q2.

Over to Europe and the single European currency will have to compete with political proceedings as it absorbs the outcome of the initial round of the French presidential elections.

The reality is that the political course will carry on to a second round on 6 May which will act as a limit on the euro.

A variety of ‘flash’ purchasing managers indices (PMI) readings and economic opinion gauges will present some primary direction for the Euro but mostly stable to softer readings suggest little stimulation.

As a result euro/ US Dollar will largely remain within its recent range although news from Spain and Italy and their debt markets will have the potential to bring into play larger moves against the euro.

IMF waiting for European lead

This week is likely to be a much calmer and quieter affair in comparison to last week which brought the ongoing Greek debt crisis to a close for the short term. IMF waiting for European leadWhether this will last remains to be seen as the struggling nation will have to renew future debt deadlines in addition to steering through an election in April.

Expect the euro to trade in limbo as traders decide on their view over how successful this latest deal will be.

Comments have been coming thick and fast from finance minsters around the world with statements ranging from ultra positive to cautious.

The G20 met in Mexico over the weekend with the topic of Euro contagion at the top of the agenda.

The eurozone countries pledged to reassess the strength of their bailout fund in March, which would clear the way for other G20 countries to contribute via the International Monetary Fund.

The G20 said “This will provide an essential input in our ongoing consideration to mobilise resources to the IMF”.

Data this week comes mainly from the States with US durable goods orders on Tuesday, GDP on Wednesday and jobless claims on Thursday.

The US government will be expecting positive figures across the board as they continue to spend their way out of recession to attract growth.

Wise Money transfers your currency out of eurozone

German Chancellor Angela Merkel told Davos-“We need a big rethink”.Wise Money transfers your currency out of eurozoneGermany’s Chancellor Angela Merkel has told the World Economic Forum that a “big rethink” is needed in the eurozone within the global economy.

“Structural reforms that lead to more jobs are essential,” she told delegates at the Swiss resort of Davos. “Do we dare to be more European?”

The eurozone is still struggling with a sovereign debt crisis and is trying to agree reform to its political system.

But many want Germany and other nations to boost the size of their rescue fund.

The International Monetary Fund (IMF) wants the eurozone to inject more cash into its rescue fund.

The IMF wants the sum available for bailouts to grow beyond 500bn euros (£416 billion) to ensure talks between private creditors and Greece do not grind to a halt.

The situation is urgent according to the IMF, which recently predicted that the economic growth rate in Europe could halve this year from an earlier estimate of 3.3% if the eurozone crisis remains unsolved.
Lessons learnt

Mrs Merkel disagrees with Ms Lagarde about what is needed.

“We have said right from the start that we want to stand up for the euro, but what we don’t want is a situation where we are forced to promise something that we will not be able to fulfil,” she said.

Mrs Merkel said that the austerity reforms being enacted – currently being felt from the Irish Republic to Italy – had to be balanced with reforms of how Europe is governed.

Mrs Merkel also acknowledged “tensions” between countries that have adopted the euro and those that have not inside the European Union (EU).

Given that the main euro paymasters Germany- and the IMF disagree on how to solve the euro credit crunch- there is only one way this story is going to go.

If you want to transfer your currency out of the eurozone, you can do so with our competitive currency converter service, please just click here now.

Euro debt packages starting to emerge

Eurozone leaders once again put off decisive action to the region dent problems leaving the markets to trade and rumours and comments. Euro debt packages starting to emergeThe crisis, which threatens to throw the world into a new recession, has been the only subject of note for traders and investors as the markets remain volatile, but over a small range.

The summit, between 17 euro nations, led to the agreement that the bailout fund would be leveraged up to €1 trillion, half the €2 trillion the markets have been looking for.

This agreement is only in words though and no official number or method for achieving it has been announced.

The disagreements to derive over exactly how these funds will be raised and also the size of the haircut that banks and institutions will have to take on any Greek bonds they own.

The IMF was said to favour a 70% cut while the owners of the bonds are struggling to get above 40%.

Further chaos added came from Italy where politicians came to blows as they discussed austerity cuts for the country.

Rumours that Prime Minster Silvio Berlusconi will resign by the end of the year added fuel to the fire and the worries that Italy could be heading the way of Greece has grown severely over the last few weeks.

French President Nicolas Sarkozy and German Chancellor Angela Merkel have been meeting with banks in order to thrash out details of haircuts and asking the banks to raise funds.

France’s 4 largest banks are expected to raise €8.8bn with 13 German banks bring €5.2bn.

Also, Spain’s 5 largest banks will raise €26bn leaving 5 Italian lenders needing to produce €14.7bn.

This plus other banks across the Eurozone will raise a total of €106bn, with Britain’s lenders not raising anything to the total.

This capital will be used as reserves to cover the losses from any write-downs on sovereign debt held with each institution.

Until these agreements are signed, sealed and delivered with the fine print read through, we are no closer to being out of the woods to last week.

G20 meeting sparks optimism

The G20 finance ministers start a two day meeting today and the main point on the agenda is to tackle Europe’s debt woes.  G20 meeting sparks optimismThe Euro has pushed higher on the expectation that the meeting will help boost the IMF’s lending resources.

Yesterday the euro slipped back into risk off mode as equities slumped and banks again came under pressure- today the G20 has turned the mood, hopefully they can back it up with solutions.

By the end of this month a plan is set to be announced on Europe and the market is pricing in a credible and concrete plan currently, however the proof will be in the pudding.

The Euro initially came under pressure as S&P again downgraded Spain by one notch to AA- and placed them on negative outlook.

The EUR/USD slipped 40 pips on this news but then steadied and turned the loss to a gain as the expectation of G20 help for the Eurozone lifted the single currency.

High yielding and commodity currencies are benefitting form the expected progress on Europe- the AUD and NZD in particular have posted weekly gains.

Today apart from the G20 meeting there is not too much on the agenda.

Later today we have US retail sales and the market will be looking for a number in line or hopefully better than expected.

Last week the non-farm number was not as bad as expected and this led to optimism in the markets and we are looking for a similar outcome today.

Euro outlook remains weak to wise money

The probability of further ECB interest rate rises in the near term increased yesterday as the eurozone recorded another slight increase in the core cost of living index.
Euro outlook remains weak to wise moneyGiven the hawkish tones (although they were slightly less so at the last meeting) of the ECB, one would expect the euro to respond positively to the prospect of higher rates, but sentiment remains weak in light of a continuing story regarding the head of the IMF, Dominique Strauss-Kahn, and its potential impact on the ongoing sovereign debt issues.

Mr Strauss-Kahn was refused bail and will remain in custody until his next hearing on the 20th May.

In his absence EU financial ministers did manage to approve the £65 Billion bail out of Portugal, the IMF providing around one third of the funds (the other two-thirds are from the 2 bail-out vehicles set up by the EU).

Over in the US President Obama again called for Congress to approve increasing the debt ceiling to avoid what he described as a potential “devastating economic and financial crisis”.

Republicans are aiming for guarantees on deficit reduction before they agree to a hike in the debt ceiling and the inertia is beginning to worry the markets, given the estimated day that the government runs out of money is the 2nd of August.

The Federal Reserve minutes from their last meeting are due today at 6pm, as ever the markets will be looking for comments on the economic recovery (especially on housing and the labour market) and anything regarding the end of QE2 and the Fed’s strategy once the easing has ended.

Politics rules the money markets at the moment

Currency conflicts at the G20 gathering in Nanjing continue to undermine markets with the obvious divisions between member nations on the way forward causing the very moves that participants are looking to correct. Politics rules the money markets at the momentThe US, through Tim Geithner, maintain their attack on the Chinese policy of not allowing its currency to float freely, arguing that to adopt such a move would enable the Yuan to take on a much more high profile global role.

He adds that becoming a constituent of the IMF’s currency basket would be the clear evolution.

The European delegates remain wary of further Dollar strength with the French President, M. Sarkozy summing up the concern when he argued against the Euro, or any other currency, usurping the Greenback role as the global reserve medium.

He added that recent Euro strength versus the Dollar was unjustified.

Overnight, we saw the stronger Dollar from the last few days give up some of its gains on comments from Federal Reserve member Bullard clarifying his reported remarks from the day before.

He said that there is no consensus on the FOMC about ending QE2 early, and that this is unlikely to take place.

He also said that the Federal Reserve would be able to tighten policy by not necessarily pushing up official rates, but by starting to sell back assets adding that this cycle of tightening would be far more difficult to manage.

The weaker Dollar / stronger Euro scenario was further enhanced by yet more comments from ECB Board members, Bini-Smaghi and Stark who both cemented in the probability of a rise in the official Euro interest rate at next week’s regular meeting.

The former talked of rates being returned to normal levels in a “gradual way” whilst Stark pointed out the fact that policy rates at present levels were exceptionally low.