The reaction in the markets to Mr Darlings Pre-Budget Report yesterday was at best muted. Watching the delivery of the report you would be excused for believing you were watching a Comedy Act at the local pub, with the level of heckling involved upon execution of the punch lines.
The headline grabbers had already been leaked, as such the PBR was more a means to positioning the Government for a possible election as early as next year, should the gamble pay off.
In our economists view the PBR will not have done enough to dissuade the MPC from making further cuts in base rate, hinting that a 50 bp cut & above is possible in December.
With the announcement over the weekend of the Citigroup bail out Stock Markets made ground, with the FTSE rising nearly 10%. However despite the recent announcements from Governments' regarding fiscal loosening & other measures to carry their economies through the global downturn, continued concerns over the state of the Global Economy remain & the rally in the markets could be short lived.
Today release of the UK BBA mortgage approvals data for October shows that mortgage approvals have fallen YoY by 52%. Not really a surprise given the very different market conditions we now find ourselves in compared to this time last year.
The US has the main bulk of the data out today, to compensate for the fact that Thursday 27th is Thanksgiving in the US as such this will mean no US data releases on Thursday or Friday.
It is anticipated that US September House Price Index will show yet further declines, indicating that stability is still eluding the US housing market. US Q3 GDP figures are also expected to show continued weakening of the economy.
Consumer confidence in the US is however expected to rise, this said it is doubted the confidence result in increased spending.
The continued concerns that remain over the US has allowed GBP to make some head way at the start of the week, with GBPUSD trading over 1.50. However as the Euro has also made gains against USD, GBPEUR remains below 1.18.
Michael Corcoran |Treasury Solutions | nabCapital