Currency watch: Back to business for victorious Obama, as Europe struggles on

9th November, 2012 by Jeremy Cook

Now that President Obama has secured a landmark second term in the White House, its back to business as usual, with the upcoming “fiscal cliff” problem the top priority.

President Barack ObamaThe principal bone of contention relates to the impending expiration of tax cuts on high income earners in the US.

The savings which could be made by withdrawing this tax break would remove US$1.2 trillion (over the life of the programme) from the current deficit. The conflict arises as Republican leadership is adamant that no further tax increases should by imposed at all, irrespective of income bracket.

This is a prime example of the difference in opinion that needs to be set aside as a common stance needs to be reached and quickly. It is this potential stand-off situation that has the markets so worried about the upcoming situation.

The key for USD and the government will be the speed at which the government can act, any progress with regards tackling the bipartisan divide and working towards a common solution will strengthen USD especially heading into a time where GBP and EUR continue to struggle.

The US markets will also take strength from the continuity that comes with Ben Bernanke staying as head of the Federal Reserve. A new government would have meant a new chairman, which would have re-opened the debate of the benefits of the QE which would have stirred markets further.

Post-election risk has always been tepid, and yesterday’s performance was no different. With the elections out of the way, the narrative switched back to the Eurozone and the latest edition of “how not to cope in a global recession”.

Equities faltered as market fears over the impending “fiscal cliff” grew (which is set to be the go to reasoning behind poor risk liquidity and returns for the foreseeable future), the Greek parliaments acceptance of the austerity package and the hugely concerning deterioration in Germany.

Industrial production in Germany fell by -1.8 vs -0.5% (exp) for the month of September. We saw GBP/EUR spike up above the 1.25 level once more, with the likelihood that it will remain comfortable at those levels. The worsening situation in Germany has largely gone unnoticed, simply because there have been bigger distractions elsewhere. But recent data will be at the forefront of EUR sell-off in capital markets.

Jeremy Cook is chief economist at World First foreign exchange

 

Leave a Reply

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

Subscribe to our newsletters

Job vacancies

Commercial/Sales Manager

Crush Wines Ltd
Bremhill/Home office, GB

Wine Buyer

Adnams
Southwold, UK

Sales Manager - Scotland

Eurowines Ltd
Scotland

Sales Manager - North-West England

Eurowines Ltd
North-West England, UK

Sales Manager - London

Eurowines Ltd
London, UK

Key Account Manager - Grocery

Australian Vintage Limited
London (Croydon), UK

Key Accounts Manager - Impulse

Australian Vintage Limited
London (Croydon), UK

Business Development Manager

Regency Wines Ltd
North Devon & Somerset, UK

Sales Manager - North East England

Eurowines Ltd
Within 15-20 mile radius of York, UK

National Account Manager

Ehrmanns Wines
London, UK

London Account Manager

The Drinks Club
London, UK

London Sales Executive

Gourvid Limited
London and Greater London, GB

Logistics Administrator

Speciality Drinks Ltd
Park Royal, London, UK

Head of Sales - Hush Heath Estate

Hush Heath Estate
Kent/ London, UK

London Sales Executive

VDS UK Ltd
London, UK

The Global Merlot Masters 2017

Deadline : 2nd May 2017

db Awards 2017

Deadline : 28th April 2017

The Global Organic Masters 2017

Deadline : 2nd May 2017

The Global Sparkling Masters 2017

Deadline : 12th May 2017

Click to view more

Global Chardonnay Masters 2016

Now in its fourth year, the competition will identify the best Chardonnay from all around the world in every price range.

Rioja Masters 2016

Now in its fifth year, the competition will recognise and reward the finest Riojas on the world stage.

Fortified Masters 2016

Now in its third year, The Fortified Masters will reward the best fortified wines on offer.

The Global Malbec Masters 2016

the drinks business is proud to announce the inaugural Global Malbec Masters 2016.

Click to view more