There doesn't seem to be a day goes by when we don't hear about another US Treasury Package introduced to stimulate the financial system. Yesterday was no different.
With the aim of reducing mortgage spreads, $800bn is to be spent on MBS & debt issued by Fannie Mae & Freddie Mac. $200bn is also to be spent on Asset Backed Securities with the intention of boosting money supply as it frees up Bank Lending to extend as new loans to consumers.
The continual extension of measures by the Feb may start to weigh on the Dollar. We expect the remainder of the weeks US data out today, prior to tomorrows Thanksgiving Holiday, to illustrate further weaknesses in the US economy, in areas such as durable goods, new home sales & personal income, thus any recent USD gains could be at risk. With GBPUSD up from yesterday trading around 1.54 & EURUSD up from around 1.28 to 1.29.
The second estimate of UK Q3 GDP figures has been released this morning & remains unrevised at -0.5%. One area to suffer has been the Service sectors, which has seen the largest quarterly fall since 1980, as the UK consumers are now less inclined spend on services in the current environment.
With all UK data already released today & no Eurozone data due, further movement in the FX markets today will come from the US releases later on this afternoon.
Tomorrow we will obviously have no US data releases & there will also be silence in the UK on the data front, leaving it to the Eurozone to deliver its news with the Business Climate Indicator & Eurozone confidence, for which we expect to see again further signs of economic weakening. The extent to which this will impact GBP remains to be seen.
Hazel Wilkinson |Treasury Solutions | nabCapital