Are we nearing the trough of the current cycle?

Only time will tell, but there are increased mutterings that data for the fourth quarter of 2008 might prove to be as bad as its going to get. With the sharp falls in GDP forecasts for the industrial nations, accompanying massive rises in unemployment, the outlook still looks grim. All the negatives however are starting to be countered by positive moves from the governments with regards to fiscal stimulus in conjunction with the already seen, monetary easing.

The US, Canada and the UK are all intent on kick-starting their economies through good-sized packages. The ‘almost agreed bailout' of the Big 3 US car manufacturers goes towards proving this point. Only the Eurozone appears to be dragging its collective feet and therefore it will be said region that will recover more slowly than the rest through a continued lack of demand. Even the VERY bad news is having less of an effect on markets.

The non-farm payroll numbers from the US on Friday were horrifically large with the figure coming in much, much higher than market consensus. Did this pull away the rug from beneath the dollar? Well, not in the way that it would have done in years gone by. It shows that investors and traders are now fully braced for the severe recession and that tolerance for bad news is now far greater than has been seen up to now.

Looking ahead this week, top-tier data is lacking but several speeches by US Federal Reserve members will be in focus as the FOMC meets next week. The Fed has signalled in the past that there is no floor for the Fed Funds rate and discussions over quantitative easing will likely re-emerge.

Elsewhere, the German ZEW survey tomorrow looks to be the highlight with the numbers expected to reinforce the opinion that the German and hence the Eurozone economies have further to decline before any sign of the green shoots of recovery. From the UK, economic data is almost entirely focused on tomorrow (9 December) when we get the BRC retail monitor, trade numbers and industrial production.

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