German unemployment rises

German unemployment rises…

Interestingly, Bank of England data released yesterday highlighted the fact that British companies are paying down bank loans at a record rate. Whilst at the outset this may be seen as a positive, it is highly likely that the reason behind the debt repayments is not because firms are cash rich, but rather due to firms breaking their banking covenants and banks placing pressure on firms to repay. Moreover, the option of re-financing is likely to be very slim as few banks have appetite to take on new deals, especially from struggling firms. The flurry of debt raising activity that we saw in the first quarter of this year appears to not be going towards expansion and is simply going to pay down bank debt. This raises the important question as to whether the Bank of England will look to extend their quantitative easing programme.

Other UK data out yesterday showed that mortgage approvals jumped to their highest level in more than a year but consumer lending remained very weak, recording the smallest rise on record. A small easing in credit conditions coupled with increased buyers interest have been cited as the reason for the 14 month high in home loan approvals. But don’t get too excited, approvals need to be translated into hard sales, whilst most believe the housing market is starting to improve few will call a bottom to the market.

Nationwide house prices out this morning echoed the positive housing sentiment with a 1.3% month on month gain in prices, taking the yearly change to -6.2%; this beat expectations of a small 0.2% monthly gain (and -7.2% year on year).

This positive data has given GBPUSD a boost this morning seeing GBPUSD touch 1.65 level before retreating back to current levels of 1.6475.

GBPEUR  has also hit a month high at 1.1750,on the release of the German data

In the Eurozone, Germany reported unemployment figures this morning, the number of people out of work rose to 3.46m from 3.41m. This is hardly surprising as companies have cut jobs to protect margins. Note that July’s seasonally adjusted reading came in at -6,000 due to a statistical change; the adjusted jobless rates was unchanged at 8.3%.

On a sweeter note, we all appear to be eating more chocolate as Cadbury’s announced a surprise 13% jump in chocolate revenues for the 1^{st half of 2009.}

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