IMF slash growth forecasts for the UK as German figures surprise to the upside

Tom Tong09/Oct/2012Currency Updates

GBP

Not a great deal happened in the markets yesterday for the Pound; The RICS housing price balance figures were released at 5% better than the consensus expected reflecting the state of the UK housing market. UK Retail sales bounced back last month with a 1.5% increase, the strongest rise so far in 2012. The National Institute of Economic and Social Research will release their estimate of GDP over the last quarter a month before the official report is announced; having a direct impact on monetary policy. The IMF sharply downgraded Britain’s growth outlook for 2013, predicting the economy would shrink .4% in 2012 and then go on to grow 1.1% next year.

USD

The Dollar started the week well as equity markets had reduced concerns over the economic outlook coupled with Friday’s upbeat US Jobs data release. It was a Bank holiday yesterday for the Dollar, no data released and not expecting anything significant today. In reference to the Rand against the Greenback, yesterday it weakened to a 3.5 year low against the dollar as strikes in the mining and transport sectors continued over pay. The Bank of America cut rates across the country’s investment sectors.

EUR

The Euro was knocked down from a two-week high after suffering from last week’s strong comments delivered by Draghi. Yesterday the German trade balance figures were released with most expecting it to be negative but in fact there was a slight raise as German exports jumped even more than expected amid growing signs that the country is performing better than its struggling neighbours. The EU’s financial Chief was quoted to be ‘less pessimistic’ about the future of the Euro in comparison to this time 12 months ago prior to the Eurozone Finance Ministers meeting.

Spain is expected to be a priority to discuss whether and when they request an official bailout; having previously made it clear to the German Finance Minister that they did not require assistance.

Big data release today will be Mario Draghi’s speech. Early this morning the EUR has sold off ahead of Mario Draghi’s speech to the European Parliament as investors look to pre-empt any negative news around the sovereign crisis.

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Written by Tom Tong

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