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The foreign exchange markets fret again
Published: 30 May at 9 AM Tags: Pound Sterling, Euro Exchange Rate, Euro Crisis, Yen Exchange Rate, UK, Economy,
After the positive stance of Tuesday, the markets went into reverse yesterday amidst concerns about the direction of monetary policy in the world’s biggest economy and some poor economic data out yesterday.
The more negative tone was set by a report from the Organization for Economic Cooperation and Development (OECD) which cut global growth forecasts across the board on Wednesday and warned that the gap is widening between faster growing countries like the US and Japan and those that remain in recession like the euro zone.
For the UK, the OECD cut its growth forecast by 0.1% to 0.8% for this year and 0.8% in 2014. The OECD still expects the UK economy to grow despite what the Organization considers to be “strong headwinds”.
One of the major obstacles for the UK continues to be the long running euro zone crisis. The OECD raised its forecast for a contraction this year in the area from the previously estimated 0.1% fall to a much sharper 0.6% decline, although it expects growth to return by 2014 to 1.1% across the region.
Much along the same lines as the International Monetary Fund (IMF) report out earlier this month, the OECD sees weakening global demand. Of note, the forecast for China has been trimmed from 8.5% to 7.8%.
Meanwhile, the latest Confederation of British Industry (CBI) monthly Distributive Trades Survey showed that UK retail sales in May fell at their fastest rate for 16 months.
To cap a difficult day for the pound sterling, the boss of the world’s largest bond funds managers Pimco has said that incoming Bank of England Governor Mark Carney who replaces Sir Mervyn King on 1 July for a five year term may trigger a fresh devaluation of the pound in the face of "soggy growth and a largely depleted policy arsenal". A devaluation by as much as 15% against a basket of others could be on the cards to help British exporters.
In Germany, data out yesterday showed that unemployment rose by more than four times analysts' forecasts this month even though the headline jobless rate remained unchanged. The government statistics office still noted that the German labour market is sound overall and solid despite the difficult economic environment. Further data also showed a sharp slowdown in the German economy in the last quarter but that Germany managed to avoid going into recession unlike the rest of the euro zone.
The more negative tone was set by a report from the Organization for Economic Cooperation and Development (OECD) which cut global growth forecasts across the board on Wednesday and warned that the gap is widening between faster growing countries like the US and Japan and those that remain in recession like the euro zone.
For the UK, the OECD cut its growth forecast by 0.1% to 0.8% for this year and 0.8% in 2014. The OECD still expects the UK economy to grow despite what the Organization considers to be “strong headwinds”.
One of the major obstacles for the UK continues to be the long running euro zone crisis. The OECD raised its forecast for a contraction this year in the area from the previously estimated 0.1% fall to a much sharper 0.6% decline, although it expects growth to return by 2014 to 1.1% across the region.
Much along the same lines as the International Monetary Fund (IMF) report out earlier this month, the OECD sees weakening global demand. Of note, the forecast for China has been trimmed from 8.5% to 7.8%.
Meanwhile, the latest Confederation of British Industry (CBI) monthly Distributive Trades Survey showed that UK retail sales in May fell at their fastest rate for 16 months.
To cap a difficult day for the pound sterling, the boss of the world’s largest bond funds managers Pimco has said that incoming Bank of England Governor Mark Carney who replaces Sir Mervyn King on 1 July for a five year term may trigger a fresh devaluation of the pound in the face of "soggy growth and a largely depleted policy arsenal". A devaluation by as much as 15% against a basket of others could be on the cards to help British exporters.
In Germany, data out yesterday showed that unemployment rose by more than four times analysts' forecasts this month even though the headline jobless rate remained unchanged. The government statistics office still noted that the German labour market is sound overall and solid despite the difficult economic environment. Further data also showed a sharp slowdown in the German economy in the last quarter but that Germany managed to avoid going into recession unlike the rest of the euro zone.
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Source: moneytransfer.co.uk