Fiscal Stimulus starts here ……..

Currencies Direct November 24th 2008 - 2 minute read

Fiscal Stimulus starts here ……..

For those of you who have been away on a desert island for the past few weeks, today sees the UK Chancellor unveil his Kick Start for the economy thinly disguised as his pre-Budget Statement. It is difficult to ascertain just how much of the recent press coverage is actual and how much is speculative. Suffice to say that whatever emerges will be the blueprint for the economy for the next couple of years and the analysis of the measures will determine the immediate direction for Sterling on the exchanges. The one factor that is a cast iron certainty is that the BoE/MPC will be cutting rates further in December. The statement to Parliament commences at 3.30 this afternoon.

Also on interest rates. The ECB President said on Friday that the ECB could cut interest rates again at their meeting next month. These comments were echoed by 2 other ‘high-powered’ members of the Central Bank but it wasn’t until ECB Director and Chief Economist Weber said the same thing later in the day, that anyone took any notice. He talked off a remarkable decline in inflationary pressures and deteriorating economic prospects and culminated by stating that the Central Bank had leeway for further easing, if necessary….. it still looks as though we will see Euro interest rates 75 – 100 bp lower by the spring.

Over the weekend we have seen further bail-outs, cash raising and capital increases in the Banking Sector. The most significant was the US Government ‘rescue’ of Citigroup Inc, the second largest bank in the States, to the tune of $300 billion. After last weeks continued weakening of the sector, this has come as a welcome reprieve with Banking stocks surging on the European bourses first thing. From the UK, Standard Chartered decided to raise £1.8 billion via a cash call to boost its capital base – probably more to do with that they could rather than that they needed to. Meanwhile in Ireland, the Irish Government has agreed to take part in a Euro 3 billion bail out of Bank of Ireland that will be led by private equity – probably of US origin.

Currencies are largely unchanged from Friday’s close and look likely to remain that way for today. With it being a Japanese holiday today and with very little data scheduled from anywhere, we will need to wait for Alistair Darling to get going to get any form of catalyst for movement. Even the worse than predicted results from the German IFO survey have failed to shift the spot rates from their, so far, tight ranges. All the economic data this week is concentrated towards the end of the week with the bulk of it coming from the US.

After hours this evening Barak Obama is due to announce the make-up of his ‘inner sanctum’ of appointees. There is interest in who is in and who isn’t but effects should be minimal for now.

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.

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