Loads of Data and Comment Out Yesterday ……..

Lots of Data and Comment Out Yesterday ……..

and it was all bad !!! Where do we start? Well, following the recent positive trend in consumer confidence (which, as pointed out in previous missives, is seemingly just on the back of lower oil and petrol prices) the market was jolted back to the dreadful reality of the manufacturing and retail sectors with very weak data and further job losses. Concern over the immediately outlook for UK plc was reignited following the release of the CIPS/Markit manufacturing survey yesterday morning. The number was expected to be bad but the reality was worse with the headline number reported at its lowest level since 1992 and indicating that industry’s output and orders are falling at their fastest rate since January of that year. This in turn, triggering widespread job losses. The exchange market took the news badly and proceeded to dump Sterling back through the previous hard won support levels of 1.5020 and 1.2000, with the moves lower accelerating through the day so that by the close, cable had fallen by its largest margin since that day in 1992 when Sterling left the ERM. The PMI survey from the Eurozone showing that manufacturing in the region was at its weakest for a decade gave no respite and the release, later in the day, from the Institute of Supply Management in the US suggesting that the economy in the States is in its worst position since the recession was also ignored by the exchange market. Stock Markets caved in and Sovereign Debt yields plunged as investors rushed out of vulnerable equities and headed for the relative of security of US Treasuries and Gilts.

Money Markets were comparatively less volatile ahead of the perceived rate cutting extravaganza this week. Estimates for the sizes of cut by the BoE and the ECB grew during the day however and increased further overnight following the decision by the Reserve Bank of Australia to cut their own rates by a further massive 100 basis points to 4.25%. Calls this morning are for the MPC to cut by a full 1.50% and the ECB to go by at least 0.75% … It is going to make for a nervous couple of days for holders of Sterling or Sterling based investments.

The Fed Chairman, yesterday evening, also aired his views on the current condition of the US economy and his prognosis was not good…. not terminal but not good. He basically said that things would get worse from here before any sort of improvement by the end of 2009. He as near as possible promised that US rates would be cut to an unprecedented low of under 1% at their meeting on the 16th Dec and also looked to appease concerns that the Fed were running out of ideas to help the ailing patient. As stated above, Wall Street took fright, the Dollar strengthened. This sort of outlook caused consternation in the commodity markets as renewed demand was deemed a long way off. Gold plummeted back to the $760 level and oil also fell, below the technically important support $50 per barrel. The price of WTI this morning is a little below $48.

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.