Navigation

All categories

Archives

Risk aversion prevails

Currencies Direct September 12th 2008 - 2 minute read

Risk aversion prevails

Financial markets had another volatile day yesterday as risk aversion increased amid ongoing concerns about the state of the global economy. Worries about the economic outlook around the world helped initial demand for the USD which hit a new one year high against the Euro and traded again below 1.75 against GBP. These initial gains were reversed as data out of the US later in the day managed to cast some doubt over the US status as the ‘safe haven’ economy in the current global economic slowdown. The US trade deficit increased in July to $62.2bn against expectations of $58bn due to the soaring price of oil. At the same time US weekly jobless claims increased to 445,000 versus estimates of 440,000, highlighting concerns the Federal Reserve will have over the state of the labour market.

The health of the US economy will be closely watched again today with US Retail Sales for August and Producer Prices both due to be released at 13.00. Followed shortly thereafter by The University of Michigan Confidence index at 15.00.

In the UK yesterday focus was on the Bank of England Monetary Policy Committee testimony to the Treasury committee. BoE Governor Mervyn King warned that the he still expected inflation to continue to rise in the short term to 5%, but that the recent fall in oil prices would “”certainly help in terms of the height of the short term peak” in inflation. King also warned of the effects any Government proposals to revive the UK housing market would have on inflation. He added that it is an “illusion” that the government could rescue the housing market without jeopardising taxpayers’ money and that increases in government spending risked increasing inflation expectations.

Due to be released this afternoon is European Industrial Production for July. Economists are expecting production levels to have declined by 0.2% in the month, increasing market predictions that the ECB will need to cut rates to support economic growth.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

Written by
Currencies Direct

Select a topic: