Dollar suffers losses as bickering continues; markets eye UK GDP
26/Jul/2011 • Currency Updates•
UK gross domestic product figures headline the economic calendar, with expectations calling for the annual growth rate to slow to a paltry 0.8% in the second quarter, the weakest since the UK began to emerge from the recession a year ago. The result is likely to weigh further on Bank of England interest rate hike expectations which are still likely to at remain record lows for the foreseeable future. As a result sterling has weakened against a basket of currencies.
With the Democrats and the Republicans unable to agree on a plan to cut the country’s annual deficit and raise the legal debt ceiling, we have seen the dollar lose ground across the board and to an all-time low against the Swiss franc.
As investors seek comfort in carry trades and gold, which reached another record high, US long-dated treasury bonds weakened and global stocks remained under pressure.
It is unlikely that the US will not reach a last minute deal so to avoid global financial turmoil but it could go down to the wire and quite likely result in the US losing their AAA rating.
The main focus yesterday and for this week will be on the majority of the European banks who are suffering from heavy loses as fear returns to markets after the rating agency Moody’s warned that Greek debt looks almost certain to default in the foreseeable future. The recent bale out package put together by the EU seems to be a mechanism to slow the Greek freight train that is fighting towards the station without any brakes.
This information is supported by Deutsche Bank’s quarterly release as their latest profits failed to reach market exceptions, as serious banks executives said that their figures were affected by continuing debt crisis being caused by finance turbulence in the Eurozone.
As a result of this poor data, European leaders have agreed to another emergency summit on Thursday to discuss another Greek bailout, this has been welcomed by global markets and the euro as it has strengthen off the back of this information.