Currency update - September 06, 2011
Sep 6th 2011, 7:47 am
#1
Currency expert
Thread Starter
Joined: May 2011
Location: London
Posts: 106
Currency update - September 06, 2011
Bank attacks spook markets
- RBA sticks at 4.75%
- Ecostats largely ignored
Good morning. They have until the weekend to surrender. If they refuse to comply with the deadline they will be smashed and thousands of innocent people will suffer. The US authorities are getting tough with Swiss banks, demanding they hand over their customer lists in case they include tax-dodging Septics. The move comes as part of an escalation of America's War On Finance. In a parallel thrust, the Federal Housing Finance Agency will sue a dozen major banks from whom Fannie Mae and Freddie Mac* bought mortgage securities during the housing bubble. It claims they misrepresented the quality of the paper** and the FHFA is seeking billions in compensation.
As with the Merkozy proposal for a tax on financial transactions a month ago, the timing of the attacks was impeccable, coming as it did just as markets were trying to digest the prospect of collapse for the euro and a second global recession. Equity markets tanked, led south by bank shares. The price of oil fell another -3%, leaving it 28% below the early May high, and gold was up by $40 (although that only represents 2% at these elevated levels). At a conference in Frankfurt, Deutsche Bank CEO Josef Ackermann urged EU leaders to get a grip and prevent a repeat of the 2008 crisis by acting decisively to restore the credibility of the single currency.
As they have in similar circumstances during recent weeks, currencies avoided being caught up in the panic. The US dollar, the yen and the Swiss franc took the lead, with the pound and the euro trailing about a cent behind. One of the worst performers was the Kiwi, which lost nearly two cents to sterling. As a small currency, when it wins it wins big; when it loses, the loss is proportionately large.
The purchasing managers' indices were brushed aside as investors focused on the equities tempest. Britain's services PMI was particularly disappointing with a four-point fall to 51.1 and the announcement cost the pound half a euro cent at the time, but its recovery was complete by lunchtime.
Running down today's agenda the BRC reported a -0.6% decline for UK retail sales in August compared with the same month last year, and the Reserve Bank of Australia has left the cash rate unchanged at 4.75%. Swiss inflation should remain nearer zero than 1% and Euroland will probably reiterate its estimate of 0.2% GDP growth in the second quarter. German factory orders probably fell in July, and the American services PMI could be very similar to the Euroland and UK figures.
Again today it will be sentiment not statistics that drives financial markets. The general strike in Italy is not likely to help matters, nor is the deafening silence from Brussels.
* The Federal National Mortgage Association (b.1938) and the Federal Home Loan Mortgage Corporations (b.1970) are US government-sponsored organisations set up to develop the secondary market in mortgage-backed securities. Their involvement in sub-prime mortgages and the like forced them into the stewardship of the FHFA in 2008, and the cost of their bailout is estimated at more than $300bn.
**There has been no mention so far of any suit against the credit agencies that attributed unfeasibly high ratings to collateralised depositary receipts consisting of soap coupons and old lottery tickets.
- RBA sticks at 4.75%
- Ecostats largely ignored
Good morning. They have until the weekend to surrender. If they refuse to comply with the deadline they will be smashed and thousands of innocent people will suffer. The US authorities are getting tough with Swiss banks, demanding they hand over their customer lists in case they include tax-dodging Septics. The move comes as part of an escalation of America's War On Finance. In a parallel thrust, the Federal Housing Finance Agency will sue a dozen major banks from whom Fannie Mae and Freddie Mac* bought mortgage securities during the housing bubble. It claims they misrepresented the quality of the paper** and the FHFA is seeking billions in compensation.
As with the Merkozy proposal for a tax on financial transactions a month ago, the timing of the attacks was impeccable, coming as it did just as markets were trying to digest the prospect of collapse for the euro and a second global recession. Equity markets tanked, led south by bank shares. The price of oil fell another -3%, leaving it 28% below the early May high, and gold was up by $40 (although that only represents 2% at these elevated levels). At a conference in Frankfurt, Deutsche Bank CEO Josef Ackermann urged EU leaders to get a grip and prevent a repeat of the 2008 crisis by acting decisively to restore the credibility of the single currency.
As they have in similar circumstances during recent weeks, currencies avoided being caught up in the panic. The US dollar, the yen and the Swiss franc took the lead, with the pound and the euro trailing about a cent behind. One of the worst performers was the Kiwi, which lost nearly two cents to sterling. As a small currency, when it wins it wins big; when it loses, the loss is proportionately large.
The purchasing managers' indices were brushed aside as investors focused on the equities tempest. Britain's services PMI was particularly disappointing with a four-point fall to 51.1 and the announcement cost the pound half a euro cent at the time, but its recovery was complete by lunchtime.
Running down today's agenda the BRC reported a -0.6% decline for UK retail sales in August compared with the same month last year, and the Reserve Bank of Australia has left the cash rate unchanged at 4.75%. Swiss inflation should remain nearer zero than 1% and Euroland will probably reiterate its estimate of 0.2% GDP growth in the second quarter. German factory orders probably fell in July, and the American services PMI could be very similar to the Euroland and UK figures.
Again today it will be sentiment not statistics that drives financial markets. The general strike in Italy is not likely to help matters, nor is the deafening silence from Brussels.
* The Federal National Mortgage Association (b.1938) and the Federal Home Loan Mortgage Corporations (b.1970) are US government-sponsored organisations set up to develop the secondary market in mortgage-backed securities. Their involvement in sub-prime mortgages and the like forced them into the stewardship of the FHFA in 2008, and the cost of their bailout is estimated at more than $300bn.
**There has been no mention so far of any suit against the credit agencies that attributed unfeasibly high ratings to collateralised depositary receipts consisting of soap coupons and old lottery tickets.
