Fire on the streets in Athens as Austerity bites and riots continue in Spain

Tom Tong27/Sep/2012Currency Updates

EUR

Euro fell to a 2 week low against the dollar yesterday after Spanish 10 year bond yields topped 6% and the country’s GDP dropped for this quarter. Artur Mas , the Catalan President, called for early elections to be held on November 25th.

This is due to the current political unrest and protests over Spain’s potential austerity measures. Similar unrest is also growing in Greece with large protests and riots happening over night. This upset and turmoil destabilizes investor confidence and sentiment.

More difference of opinion over the role of the ECB in recapitalising the banks came to the fore yesterday. With German, Dutch and Finish ministers saying that the ECB’s role should be limited.

Swedish Krona fell yesterday as the consumer confidence was lower than had been expected.

GBP

The pound continued its three day slump against the resurgent dollar, dropping from its 13 month high. However the effect of this is limited because sterling is still outperforming the euro massively.

The pound is likely to be helped due to the farm subsidies due this week. These are made once a year and will see around 3 billion euros coming into sterling.

As the eurozone is the UK’s largest trading partner, the Bank of England has flagged risks to growth due to the austerity measures. Also, the CBI has given some positive news with insolvencies declining and retail sales up.

Last quarter’s final GDP figure out at 9.30am today, most analysts are predicting there will be no change to the figure.

USD

Although the new home figures slipped slightly in August, the figure is still a large increase on the August figure for 2011, and the median price for a house increased by a massive 11.2 % (highest increase since 2007).

Big day for the dollar today, some very important data being released. We have the durable goods orders which will give a good idea as to industry investment sentiment. Consensus are expecting a negative figure.

The annual GDP figure is out today in the USA, we are expecting the figure to be a disappointingly low figure.

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Written by Tom Tong

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