Weak German figures halt Euro gains as Obama postures with Republicans over debt ceiling

Tom Tong16/Jan/2013Currency Updates

EUR

Having risen about 1% against USD so far this year, the euro fell for the first time in four sessions. This is due to the negative German GDP data that was released yesterday, cutting away at the gains made after the positivity of Draghi’s speech last week.

Jean Claude Junker , the Eurogroup President and PM of Luxembourg, said that the single currency exchange rate is dangerously high, having negative effects on trade and consequently growth. This is causing the eurozone’s appeal as a safe haven to diminish.

Prime minister Rajoy ruled out an aid request from ECB, however he stated that expansionist policies will not be possible in Spain for the near future, but that the stimulus for a recovery should be provided by the creditor nations of the eurozone (i.e. Germany).

Industrial output figures for November, released yesterday, showed that the industrial output of the single market has collapsed and is heading straight for recession. Production was down 3.7 % on the same month in 2011. Italy has suffered the steepest decline, with their output down 7.6%.

Important info out today is the CPI figures this morning, an important gauge of inflation.

USD

Some positive news for the much maligned greenback. An increase in retail sales last month pushed the dollar higher against most major currencies. The Commercial Department retail sales rose 0.5% in December, an improvement on the expected 0.2%.

With regards to the impending issue of the debt ceiling, Obama has said that he will not give into Republican demands of spending cuts matching any increase in the debt ceiling. He has received support on this from Bernanke who said that the Republican plan was akin to a family refusing to pay its credit card bills. The political posturing over this has caused to concerns that the US credit rating could be negatively affected.

People will be keeping any eye on the FED’s Beige Book report later on tonight. This will give a good idea on the picture of the overall economic growth of the States.

GBP

Anticipation is growing around Cameron’s speech on Friday and the growing uncertainty over the likelihood of a UK referendum with regards the UK’s membership of the EU. This has seen sterling suffer for 7 consecutive days against the euro, culminating in a 9 month low.

Added to this is the dramatically increased risk of the UK losing its AAA status. Tony Stringer , MD of Ratings agency Fitch, says that they will be watching the budget closely and suspect that it will lead to a negative outcome for the UK rating.

ZAR

Anglo American (the world’s largest metal producer) has stated that it is slowing its output. This has led to concern that South Africa’s current account deficit will widen. Subsequently causing the Rand to fall to its lowest level against USD for 6 weeks.

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Written by Tom Tong

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