As the Hank Paulson & Ben Bernanke were fighting in congress to try to stop the collapse of the financial world, there was at least some good news from the globe destroying LHC experiment, who have had to delay their attempts to suck the physical world into a black hole, until the spring, due to a technical fault. So while we all wait for doomsday, the struggle to get the bail out plan through congress continues in US congress. Both Paulson and Bernanke have been arguing for the plan, Paulson argued against trying to tack extra ideas onto the plan to make it more palatable for voters, and Bernanke was trying to emphasise the fact that the plan wasn't to bail out the banks, but the whole system which allows savers to save, borrowers to borrow, and pensioners to draw an income.
The plan is still struggling to get through congress with many thinking that it gives a no-string bail out to failing banks, and dictatorial powers to the Treasury Secretary, who under the plan would be immune from prosecution. However after a few days of Dollar weakness the sell off seems to have slowed down. Sterling dipped down from it's high against the Dollar to sit just above 1.85. The Euro has also slipped back against the Dollar falling from above 1.48, to around 1.4650.
The Euro has suffered against the Pound as yesterday's purchase managers index fell even further than last months reading, pointing to the slowdown in the Eurozone continuing into the third quarter. The Pound was able to take advantage of this and climb back above 1.26. Commodity prices have fallen, as the Dollar has risen, with Oil falling down towards $105, copper down 3.8%, and nickel down 1.7%.
Today we get the CBI Distributive Trade survey for September, which in the past has painted an even weaker picture than the official statistics, and is likely to do so again. In the Eurozone it is the German IFO index, likely to follow the German PMI in showing further decline in activity; in the US we get more news from the epicentre of the credit crunch, in the form of existing home sales, likely to fall back after last months surprise rise. With negative news all around it may be Bernanke's testimony to congress, undoubtedly on the bail out plan, but also on the broader scope of the economy, that the markets may focus on.
Michael Corcoran | Treasury Solutions | nabCapital