No shocks from Darling

No shocks from Darling

A largely political budget failed to rattle the financial markets and the pound was unmoved on the back of the budget- although it did slip against the USD due to other factors. It was announced that there would be a reduction in the government borrowing requirements but it was not enough to shift sterling especially as no clarity was divulged on how exactly the deficit would be reduced. Sterling did slip against the USD following jittery trading on the downgrade of Portugal and the ongoing back and forth with Greece and the EU which led to USD buying. This morning the pound has staged a recovery following much better than expected retail sales data from the UK at +2.1% month on month; currently we sit at 1.4950 on the USD and 1.12 against the euro.

The euro was the big mover in the currency markets yesterday- on the downside. There is hope of an agreement for Greece in the next couple of days from the EU summit but until this is definitive the euro will be under pressure. Interestingly the PBOC (public Bank of China) have commented that the Greece debt crisis is just the beginning for the Euro zone- not good news for the euro and this could encourage longer term holders of the single currency to start dumping it and thus forcing it lower still.

Interestingly there is news of Chinese tightening through the sale of three month bills with 30 billlion RMB more than last weeks auction. This follows reports of further accelerating pace of growth and lending which the Chinese will want to temper. The Chinese have led the global recovery drive so far and the more they look to tighten and slow their rapid pace of growth then the greater effect on those reliant on China’s growth- i.e most major economies.

report by Phil McHugh

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