February, 2010
Foreign Exchange - UK Daily Update - Friday, February 26, 2010 8:42 - 0 Comments
World First Foreign Exchange 26 February 2010: Sterling Beasted Over Double-Dip Recession
· Business Investment falls by 25%, fears over a double dip recession increase
· UK GDP due at 09.30
· Greece may face further sovereign debt downgrade
· US jobs market weakens unexpectedly
All this and more is available on our blog. Click here http://www.worldfirst.com/blog
Sterling was hammered yesterday, losing ground against all the majors as fear ran roughshod through the market. Fears that the UK had not escaped recession trumped those of sovereign debt downgrades for Greece and worries over the US jobs market.
The concern for pound was born out of a horrific business investment figure. Q4 investment into the UK dropped by 25%; a record and left analysts wondering whether the relief that we saw a month ago when the UK posted at 0.1% growth figure would be replaced by yet another minus amount. We find out today at 09.30. A poor figure will see sterling slump back close to 1.50 against the dollar while nudging 1.11 versus the European single currency.
It’s not like the euro is even strong at the moment. Moody’s, as well as S&P, are considering sovereign downgrades for Greece as a country. This move would see Greek debt to be illegitimate to use as collateral against loans from the ECB. That would leave the Greeks only able to raise funds in the markets; a place where yields are rising, heaping more pain on the indebted nation.
These two pieces of data were already enough to see equity markets get nervous and the final coffin nail came in the form of jobs data from the US.
Initial jobless claims, the amount of people newly applying for benefits in the US, rose unexpectedly. This contrasted the fall in unemployment form 10% to 9.7% we saw at the beginning of the month. Equity markets bled red as the prospects of global ‘double dip’ loomed large.
Apart from the UK GDP data, we also have US GDP at 13.30 and US consumer confidence at 14.55. We would expect risk to continue to slide over the course of today
Have a good weekend.
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