German investor confidence falls amid fears over Greece’s future
22/Apr/2015 • Currency Updates•
The Pound rose throughout the day on Tuesday following Dollar weakness to finish 0.7% higher.
Tuesday was a very light day in terms of data releases in Britain. Attention instead shifted to politics and a potential coalition between Labour and the SNP party. While Labour leader Ed Miliband has previously ruled out a coalition with the Scottish National Party, former Prime Minister John Major yesterday suggested that Labour would be subject to a “daily dose of blackmail” from Nicola Sturgeon’s party. Major suggested that the two parties could form an “anti-Conservative alliance”.
Minutes from the Bank of England’s April monetary policy meeting will be released at 9.30am this morning, including the all-important vote on the interest rate. While we expect the vote to keep rates unchanged to remain unanimous for the fourth consecutive meeting, any surprises would no doubt cause significant volatility in Sterling this morning.
Pressure from Greece continued to weigh on the Euro, although the single currency still managed to climb by 0.8% on the Dollar.
Greek bank shares slid to a record low on Tuesday as reports suggested the European Central Bank was considering pulling the plug on the country’s lenders. While President Mario Draghi has insisted Greek banks continue to be eligible for the central banks emergency liquidity assistance (ELA), issued in February, other members of the Governing Council have suggested that this should not continue after the summer. A pulling of the plug on ELA, seen as a life-support for the Greek economy, would cause Greek banks to go bust in a matter of months according to rating agency Standard & Poor’s.
Investor sentiment towards the German economy dropped unexpectedly in March, as weak global growth and concerns over Greece weigh on the economy. While German analysts and investors envisage further growth in Europe’s largest economy, the already strong base in the country could mean any further improvement will be limited. However, strong tailwinds from a growing labour market, low oil prices and a weaker Euro should put Germany in a very good situation for at least the next half a year according to the report. The measure of economic sentiment fell from 54.8 to 53.3, although encouragingly, the current situation index soared to its strongest reading since 2011 at 70.2.
More positive news for the Euro is expected today with the announcement of consumer confidence data at 3pm London time. The monthly European Commission figure is expected to hit a fresh multiyear high.
Despite a relatively quiet day in the US economy, the Dollar fell against its peers, with the US Dollar index ending the day 0.5% lower.
Another encouraging poll was released in the US yesterday showing public confidence in the future of the US economy is hitting multiyear highs. The CNN/ORC poll showed that 52% of Americans believe the economy is currently in a strong position, the highest reading in the survey since September 2007. State wide labour statistics for last month were released in the US yesterday. Data showed that unemployment fell in 23 US states, rising in just 12. Unsurprisingly given the recent fall in commodity prices, states with large oil and gas drilling saw the biggest job cuts. Elsewhere, the Johnson Redbook index, a measure of sales growth in merchandise retailers, dipped on previous to an annualised 0.8%, its lowest yearly gain since 2012.
Mostly second-tier announcements in the US this afternoon including mortgage applications and existing home sales.
Rest of the world
The National Bank of Hungary became the latest central bank to cut its benchmark interest rate this year, slashing rates from 1.95% to 1.8%. This was in line with expectations and mostly priced in by markets, with HUF ending only marginally lower on the Euro as a result.