You are currently viewing the International Edition. You can also switch to the Hong Kong Edition.
Thursday 2 July 2015

Currency Watch: The calm after the storm

1st February, 2013 by Jeremy Cook

The “normalisation” of financial conditions in the Eurozone that we have seen since the summer of last year remains encouraging, and the euro is stronger as a result.

Global currencies

We saw this week how a bill sale of German one-year debt returned a positive yield for the first time since June last year.

This means that for the past seven or so months investors have still been paying Germany to invest in German debt; the fear of losing large amounts of money elsewhere was so great that losing a small bit of money was preferable. This week that reversed to normality.

Likewise, the yield on US Treasury debt payable in 10years rose back above 2% for the first time since April, another indicator that investors were rotating out of their safe-haven holdings and into a more risk comfortable allocation of resources.

As I have said previously these moves should not be confused with a weakening of the crisis; more a switch from the near-term acute pain of a sovereign crisis to the chronic ache of a growth problem. This does mean that we are still seeing rising equity markets and record prices while the underlying growth remains as a myth.

On the UK, Sterling markets had positioned for a weak figure and a weak figure is what they got. I can’t understand the surprise however. PMI surveys from businesses in manufacturing, construction and services all averaged in contractionary territory through the last three months of the year while current account figures last week emphasised a slowing of international trade.

Consumer spending, or the lack thereof, can be summarised by the recent high-profile High St closures with a low spending Christmas unable to prop up companies that have been forced to cut prices through the year to combat low demand.

It is likely that this will be the final straw for our AAA credit rating and we expect a downgrade by at least one agency by the end of Q1. The impact of this is more political than anything however, and we emphasise that a downgrade will not prompt a “sterling crisis” or a crash in gilts. In fact we look at it as a positive as it alleviates one form of short-term uncertainty that has plagued GBP for the past few months.

Our GDP estimate for 2013 as a whole remains unchanged following this number at 0.6%

Jeremy Cook is chief economist at World First foreign exchange

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

If that's interesting, how about these?

Armand de Brignac launches its most expensive Champagne ever

Jay-Z’s Champagne brand Armand de Brignac has launched its most expensive more...

10 of Hong Kong's oldest bars

To commemorate the 18th anniversary of Hong Kong’s handover on 1 July 1997, more...

World's cheapest city for a beer revealed

The average price of a bottle of beer is £1.07 in Krakow and Kiev, making them more...

Global Wine Buyer

London, United Kingdom

Competitive

UK customs seize 550,000 litres of alcohol

More than 550,000 litres of illegal beer, wine and spirits have been seized by more...

Rise for Haut Bailly in Liv-ex 2015 classification

Liv-ex’s bi-annual “re-classification” of Bordeaux saw Haut Bailly leap more...

Mumm releases Santana sparkler

Legendary guitarist Carlos Santana has teamed up with Mumm Napa to release a more...

Diageo confirms Gleneagles sale to Shoreditch group

Diageo has confirmed the sale of its luxury hotel and golf resort in more...

Hart Davis Hart biggest in US

Chicago-based wine auctioneer Hart Davis Hart is the market leader in the US in more...

Diageo appoints North America president

Deirdre Mahlan, Diageo's chief financial officer, has been announced as the more...

Digital and Communications Executive

£22,000-£26,000 dependent on experience

China recognises 'Bordeaux'

China has said it now recognises the term “Bordeaux” as a brand after what more...

UK reviewing alcohol intake guidelines

Health officials are to review the government's drinking guidelines, as more...

Pimm's and English wine sales leap

UK supermarket Waitrose has noted a surge in sales for Pimm's, strawberries and more...

Marketing and eCommerce Manager

London, United Kingdom

Competitive, includes equity options

Sud de France launches Wine Hub

An "innovative" tool designed to support wine producers and importers operating more...

Rioja revellers soaked in wine battle

Thousands have taken part in Rioja's annual wine fight, drenching each other more...

Santa Rita launching new Irish campaign

Chilean wine producer Santa Rita Estates is spending €500,000 on a new more...

E-commerce, Sales & Marketing Executive

London, United Kingdom

Competitive salary and bonus package based on experience and qualification.

WOSA woos UK indies and on-trade

Wines of South Africa has announced plans for a new UK trade tasting later this more...

Deadline looms for IWSC digital post

The International Wine & Spirit Competition has made a final call for more...

Lidl hints at plans for online wine shop

UK supermarket Lidl has not ruled out launching an online wine shop, reporting more...

Hatch Mansfield – Brand Manager

London, United Kingdom

Competitive salary

Australia puts quality centre stage

Wine Australia has pledged to invest AUD$35m annually for the next five years more...

World's best beer and wine festivals

Forget Glastonbury, these are the festivals you should be making a beeline for more...