Global Economies Continue to Feel the Pinch….

Global Economies Continue to Feel the Pinch …

….. but it is Sterling that continues to bear the brunt of investor’s concerns. The headline in the The Times this morning caused a quick skip in the heartbeat, “Banks under the cosh as £1 tumble towards Euro 1”. I wondered what on earth had occurred overnight !!! As it happened, the headline was very much ‘for effect’ rather than based on the actual. Sterling is indeed at an all-time low against the Euro but over the past few days has actually stabilised at these levels. The outlook remains clouded with a big danger of a further ratchet lower but as more dire news emerges from Eurozone, the prospect for a lower cross will diminish. On that note, the magnitude of the declines in both French and German industrial output, reported earlier in the week, were staggering. This doesn’t bode well for tomorrow’s industrial output report for the whole of the Eurozone where the estimate is for a decline of 3.7% year-on-year. Somewhere down the line, probably not now until the New Year, there will be a re-assessment of exchange values with, in my view, the Euro being downgraded against all the majors.

We are now in the ‘dead-zone’ data wise with nothing scheduled to come from the UK or Germany for the next 2 days and only the Ind Prod number from the EU. The US and Canada are slightly more exciting but the whole pre-Xmas lull appears to be well and truly upon us. We do have the UK CBI monthly industrial trends survey later this morning but there are no prizes for guessing the mood of that…… As if to pre-empt the figure, the BoE’s Kate Barker, in the Scottish Herald paper, lays the situation out – bleak on the economic assessment, with any recovery in the UK unlikely to be evident until the 4th Quarter of 2009, with the likely pace of recovery, very hard to judge.

Elsewhere….. The big news overnight was the Korean central Bank cutting their official rate by a massive 100 basis points to a record low of 3%. This ‘super-investor’ in US Treasuries has now cut rates from 4.25% in early October in an unprecedented series of reductions and cites the need to tackle the persistent credit crunch and help the economy to cope with the global downturn. This morning, the Swiss National Bank have also further reduced their rates by another 50 basis points, bringing their target band down to 0 – 1.00%.

In the US, The House of Representatives agreed to a $14 billion interim loan to GM and Chrysler to tide them over. The affirmation of the bail-out, however, still requires a positive vote following the Senate debate on the matter later today. If passed, this would just sees the two companies through to March 31st – the deadline by which they must file restructure plans (and even then they are not safe).

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.