Consumer Credit and mortgage lending drop in the UK as Greece announces new austerity measures

Tom Tong02/Oct/2012Currency Updates

EUR

European markets strongly bounced yesterday after PMI data was released. Although still contracting they did beat the analysts forecast. Bank stress tests conducted by Oliver Wyman showed that Spanish banks acquired €59bn to meet capital requirements as opposed to the expected €100bn, this news did bring about a sense of optimism.

However we might we might see a slight correction today as Moody’s questioned the method of the calculations used by Oliver Wyman. Overall there was a lot of hypothesising yesterday. Today it looks like sentiment might flip around, futures are signalling a down day even though figures were positive yesterday. Unfortunately this probably means we are not going to see a lot of volatility. Market orders placed close on both sides of the market are recommended in case we see a breakout.

USD

US dollar gained slightly and stock markets were the biggest benefactors on the news that the third round of quantitative easing will not be inflationary. US PMI data came in over expectations thus boosting the appetite for risk. This further boosted equities and the dollar. Friday is the big day for the Dollar as non farm payroll figures are due. Generally speaking if we see a better than expected figure USD will gain and vice versa.

GBP

Analysts are currently of the opinion that the pound is the best out of the three ugly sisters. The demand for sterling will always hold stable in the long term. This is due to the way our pension funds are managed, requiring to hold long term securities in the form of 30 year government bonds. In the short term sterling strength is more likely to be effected by news coming from the euro zone and the USA than out of the UK at present. However, hopes for the growing recovery in the UK where dented yesterday as drops in factory orders and credit dominated the news flows.

Elsewhere

The reserve bank of Australia cut its interest rate to 3.25 from 3.5 percent. This weakened the aussie dollar off as the decision was not expected by the markets. This makes it the lowest level since 2009.

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Written by Tom Tong

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