DY; Eurozone Econonmic Confidence Rises To The Highest Level Since January 2008
GBPUSD: The broadest measure of money supply in the U.K. dropped 0.1 percent in August after rising 0.4 percent the month prior, while the annualized rate jumped 1.9 percent. Meanwhile, net consumer credit unexpectedly contracted during the same period to mark the third decline this year. The data does not bode well for the households and banks in Great Britain as the economy already faces major headwinds going into 2011. As of late, policy member Andrew Posen said that the central bank should embark on a fresh round of quantitative easing, and went onto add that inflation in 2012 and 2013 will likely be below target, In turn, the comments by Mr. Posen weighed on the British pound. Going forward, I expect his comments to quickly fade as inflation in teh U.K. remains sticky around 3 percent, while the economy continues to grow (for now that is). Additionally, the increase in the value added tax measures, which will be implemented next year may cause inflation to remain at its current highs. In turn, with uncertainty about growth prospects gaining momentum, the split amongst the committee may widen in the upcoming months. All in all, during the short term, the British pound is likely to continue its advance against the U.S. dollar but the exchange rate may come back under pressure in the first quarter of 2011. To discuss this and other topics, please visit the GBP/USD forum.
EURUSD: Economic confidence in the Eurozone topped expectations in September as figures rose its highest level since January 2008, while the consumer confidence component remained unchanged. At the same time, the breakdown of the report showed that business confidence about future production and selling prices tipped higher, whilst retail confidence about expected business also increased during the month. In turn, the Euro continued its northern journey against the greenback as the tight ascending channel remains intact. Indeed, today’s reading bodes well for the region and the currency in the short term, however, going forward, I expect the reading to tumble towards the 95 area as governments will implement tough austerity measures in order to battle their high budget deficits.
