Risky assets continue to rally as reports of boost to IMF fund emerge

Tom Tong19/Jan/2012Currency Updates

GBP

The UK unemployment figures increased to a 17 year high yesterday reaching 8.4 % from 8.3%. This grim news when combined with the current inflation rate of 4.2% means that living standards are still being squeezed for the majority of UK households. Even though the rate of inflation is set to ease over the course of the year it will be a long time before the pressure on household finances eases. With the UK GDP figures due to be released next week and forecasted at just 0.4% many City economists braced for a drop in economy size hinting at a “double dip” recession.

EUR

The Euro rallied against both GBP and USD. The IMF is proposing to raise as much as $500 billion from member countries to safeguard what is expected to be a $1 trillion bailout the global demand will require in the next two years. This eased the concern of the euro as there is new hope for struggling European debt markets to be interjected with finances.

Bonds fell for the first day in three yesterday as a Greek finance ministry official reveals that Greece and its creditors may have a deal by the end of the week following talks in Athens.

Standard and Poor’s lowered credit rating is yet ignored and debt is sold for reduced interest rates from countries such as France.

USD

Goldman Sachs sees a 58% slip in earnings which, like many of its competitors, was hit by Eurozone turmoil and a slowdown in the market activity in the last three months. However the fourth quarter reaching higher than expected estimates offered reassurance to investors and home-builders. Manufacturing output did rise for the U.S reaching 0.9% showing positive signs.

China, the largest foreign lender to the US reduced its holdings of treasuries in November for a second month as yields on the debt approached lows of the year and overall foreign demand accelerated.

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Written by Tom Tong

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