A new government in Greece and UK employment down looks like there may be light at the end of the tunnel.
Yesterday saw the Bank of England minutes released from the meeting held on the 7th June. One of the main focus points was to see if the members had voted for further quantitative easing. The quantitative easing programme aims to boost the economy by encouraging banks to lend more to businesses and consumers at lower rates.
Unfortunately the votes were one short of a majority so further QE, for next month at least, is on hold. Despite the fact that the UK is back in recession, the main reason for the Bank of England not increasing its QE programme is due to high inflation. The problem with increasing the amount of money in the economy is that it can directly influence the inflation rate. Other data released yesterday was the UK unemployment data. This data showed that the unemployment rate decreased to 2.61 million (8.2 percent) this is down by approximately 51,000 in the last quarter.
Although this figure was positive the data also showed that number benefits claimants increased. The data didn’t seem to have much impact and the pound held its ground in the markets. The focus today will be the retail sales figures which will be released at 9.30am. There have been mixed predictions for the result of this data so depending on the result; expect the market to be volatile around this time.
Yesterday we had news released from The Federal Reserve meeting. It has cut its forecast for economic growth in 2012 from 2.9 percent to 2.4 percent. It has also predicted a central unemployment rate of up to 8.2 percent, having forecast up to 8 percent on 25 April.
The central bank also extended its programme of swapping short-term bonds for long-term ones, known as Operation Twist, until the end of the year. The idea of the programme is to cut the long-term cost of borrowing for businesses and households. The programme is worth $267bn (£170bn). There will be data released this afternoon including existing home sales and the weekly jobless claims. Expect confidence in the USD to be a little volatile today with markets digesting the Fed’s data from yesterday.
Yesterday saw the new government formed in Greece. The new government is a coalition of the rivalling parties, PASOK and the New Democracy Party, with the latter holding the majority. The deal ends the uncertainty which has been a focus for the EU over the last few weeks.
The new government will be under pressure from the anti-austerity supporters within the Greek public. Greek stocks rose moderately in response to the news that a coalition had been formed, with Athens shares closing up 0.5 percent. There will be PMI data out today for the Euro zone.
As usual the data will be released for the individual countries then with the EU total. Expect the confidence to vary this morning with this news although the market has probably adjusted on predictions. Predictions are that the data will be lower than 50 therefore showing a contraction.
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