US consumer spending increases as Sterling suffers due to renewed uncertainty in Europe
30/Oct/2012 • Currency Updates•
Sterling fell against the dollar yesterday as concerns about Greece and Spain crimped demand for perceived riskier currencies and outweighed better-than-expected UK lending data.
The pound tracked a drop in the euro against the dollar, with the single currency pressured by uncertainty over whether Greece can agree to a deal on austerity, while Spain continued to hold out on requesting a bailout. Lending to Britain’s consumers rose at the fastest pace in more than 4-1/2 years in September and mortgage approvals for house purchases also beat forecasts, although the figures were unable to boost the pound. While the better lending data added to signs of recovering economic activity, some strategists said sterling was still vulnerable to developments in the indebted Eurozone the UK’s largest trading partner.
The euro reached the lowest level in almost three weeks, weakening 0.3 percent amid a growing divide over Europe’s new bailout strategy and data showed the regions three year old sovereign debt crisis is weighing on its economy. Things to look out for are the report on Greece’s progress in meeting internationally agreed targets compiled by the troika of the European Commission, the IMF and the ECB.
The leaders of Spain and Italy both played down their need for a full bailout yesterday during a joint conference in Madrid. Speaking alongside Italian technocrat PM Mario Monti, Spain’s Mariano Rajoy said a rescue package was not essential at the moment.
Clearly news about Hurricane Sandy dominates news around America. Today the U.S equity markets are closed and could remain so through tomorrow. As a result treasuries rose pushing a 10-year note yields to almost a two-week low during a shortened trading session as concern grew over ‘Sandy’ which will disrupt business and potentially affect 60 million people.
On a positive note US consumer spending increased 0.8% which indicated the biggest part of the economy was picking up as the quarter drew to a close. This accounts for 70% of GDP which is the highest since February after a 0.5% growth in August. Personal income also increased by 0.4% in September according to the Commerce Department on Monday. It is hoped this increase in spending will help the worlds largest economy overcome a slowdown in exports and business investment as global growth slackens and concern mounts about the fiscal cliff.