The euro slipped on Friday as consumer confidence in the eurozone in May stayed close to the 22-month low reached in March.
What a difference a day makes....
…As the equity markets surged higher after reports that Citigroup’s chief executive said that the US bank was profitable in the first two months of the year. This helped the US dollar weaken across the board as risk appetite came back into play- a real turnaround for the heavily sold markets on Monday: also a real turnaround for Citibank who were rumoured recently to require more help from the government. In the markets the dollar weakened against a basket of currencies but maintained strength against the pound and the euro.
Today at midday the Bank Of England will introduce Quantitative Easing using £2bn of the £75bn created to try to liquidate the wider economy. The markets at the moment are mixed on the impact of QE and currently it is being conceived as sterling negative due to the uncertainty and the de-stabilising short term effects it could have. However on the flip side many economies may need to follow suit as policy easing will not be sufficient to increase money supply, therefore the UK may be ahead of the game- time will tell! As the introduction of QE is new then undoubtedly the chatter and debate has spiralled with economists…in the words of George Bernard Shaw "If all the economists were laid end to end, they’d never reach a conclusion. " so let us hope that actions will be more effective than words on QE.
In other news Chinese exports dropped sharply in February, the drop of 25.7% compared with a year ago was sharper than analysts had anticipated- it seems a set trend globally that export markets are suffering as demand wanes. Sterling in the short term remains under pressure with uncertainty surrounding QE, coupled with weak Industrial production heaping pressure on the pound.