httpvh://www.youtube.com/watch?v=sBJxFTmxmq0

The world took a breather yesterday as equity markets and other risky assets rallied back above key psychological levels. The FTSE and other European markets were all around 3% higher with similar gains seen on Wall St.

The good markets were not dented by the US GDP reading which showed a slight stumble in growth on the other side of the Atlantic. Output fell to 3% from the initial reading of 3.4% as the business investment component slipped by a full percent. This is slightly concerning for the US as company spending has one thing that has been a evident since the recovery began.

Spain became the latest country to pass austerity measures but only just. The bill in the Spanish parliament was only passed by 1 singular vote as lawmakers clashed over plans to reform the cajas, loosen labour markets and cut pension provisions.

As a result of the slight softening of the risk atmosphere most currencies, including the euro,  were able to gain against the dollar. Sterling has managed to consolidate at these high levels and there is the possibility that we may see prices in the 1.48s soon. If we do, I would advise all GBP/USD clients to cover short term liabilities forward as it is our belief that we will fall off over the summer.

Politics comes back into focus for the pound today as David Cameron is to outline his plans to transform the UK’s economy for the better. Most of the tax and spending arguments and outlines will be left until the budget at the end of the June but he will talk of the need to rebalance the economy towards the manufacturing and export sectors. Expect questions as well over the coalition’s plans for Capital Gains Tax; a policy that David Cameron is clashing on with the far right of his party.

Data this week is rounded off by PPI and Michigan Cosumer Confidence from the US