Cameron urges European leaders to take bold action in Davos
27/Jan/2012 • Currency Updates•
Following the World Economic Forum in Davos, David Cameron announced to EU leaders that they must become “bolder” and it is a “perilous time” for all of them. Despite weak data coming out of the UK this week regarding GDP being decreasing to -0.2, Cameron was quick to defend his governments deficit reduction plan, by saying it helped the UK “get ahead of the markets”. German Chancellor Angela Merkel reinforced the UK’s stance, announcing that a “big rethink” was needed to support the lack of jobs available to the unemployed and also wanted to see a significant rise in living standards.
Greece’s outlook appears upbeat as talks between Athens and private creditors continue as they look to make progress on Greek debt. The two parties have yet to agree on an interest rate on the new bonds which would replace the existing government debt. Moving west of Greece, Italy’s latest debt auction has seen bondholders increase their stake to decrease the interest rate. The rate on two-year bonds saw a fall of 1.09% to a level of 3.76%, with this in mind Italian bonds have been seen as a less risky investment compared to Greece.
Yesterday saw Sterling fall to a four-weak low against the Euro as hopes of progress in Greece continue and worries in the UK have increased regarding poor data out of the UK. Despite the GDP figures being negative the pound hit a five-weak high against a weaker dollar. Continuing pressure has grown as Sterling has also come under further exceptions from BoE as expections for monetary stimulus grow and opinions heighten that the UK is on the verge of a double dip recession.
Despite the negative outlook the short term remains positive against the dollar as the pound was buoyed by the U.S. currency, as the Greenback was seen to be sold off after the announcement on Wednesday that the Federal Reserve said that they would hold interest rates close to zero until 2014.
The U.S. dollar extended losses against most major rivals Thursday, after a pair of U.S. economic reports showed jobless claims and durable-goods orders jumped.
A day earlier, the Federal Reserve said interest rates were likely to remain at ultralow levels until late 2014, which reduces the appeal of the greenback to international investors. However in this mornings trading, the dollar seemed to claw back some of its losses as the rest of the world digested the data from the previous day.
Today, advance GDP report lined up at 1:30 pm GMT. It is predicted that the U.S. economy actually grew by an impressive 3.0% over the last quarter of 2011. This is the first of three versions that are released and has the highest chance of prompting a stronger market reaction depending on risk sentiment by investors.