The markets gained a little bit of stability last night as the US economy got some good news (which has been in short supply lately) from it’s housing sector with new home sales rising 5.5%, and now rising up for the last two months in a row. The news brought some calm to the US stock markets, although they did dip just before the close. The dip helped keep the Aussie Dollar on the back foot, in spite of rises for some industrial metals. The Aussie Dollar still sits around 2.5 against the Pound, and 0.62 against the US Dollar.
With little economic data out yesterday, the markets were briefly exercised by the G7 statement, once again warning against excessive volatility, which seemed to herald a coordinated intervention in the currency markets. However as it became apparent, and was confirmed by France’s finance minister, that the statement was just to give tacit approval to Japan to intervene in the Yen’s rapid rise, it lost some of it’s lustre. There has been a few governments attempting to intervene in the currency markets recently, however they seem to have learned from past failures, as instead of ‘drawing a line in the sand’ and attempting to hold a certain rate, which the UK has learnt in the past doesn’t work, they instead calm the markets by slowing down a currencies rise or fall.
The Japanese Government’s intervention may have had some effect as the Yen has stayed steady and even weakened slightly against the Pound, although it still sits strong around JPY148. The Pound has also climbed against the Dollar clawing back some losses to sit around 1.56, and has stayed relatively weak against the Euro still hovering around 1.24 to 1.25.
We have the CBI Distributive survey report out this morning and is likely to see the high street under more pressure. There is also likely to be some grim news in the US this afternoon, to take the shine off yesterday housing figures, with house price figures expected to show a drop, by maybe as much as 16.6%, and consumer confidence figures also expected to drop sharply. The FOMC start their meeting today and are expected to announce another 50bp rate cut tomorrow, taking the Fed funds rate down to 1%.
Michael Corcoran | Treasury Solutions | nabCapital