The pound continues to fall on the worsening economic sentiment in the UK after the all too brief blip up yesterday. It is now over 4% down against the Euro since the 10 January 2011 high.
The GfK NOP Consumer Confidence Index dropped eight points to -29 in January, the lowest figure since March 2009′s -30. January saw decreases across all five measures; the most notable being in the “major purchase” index, which dropped 21 points, Gfk NOP added. This consumer confidence index has now tumbled in January faster than at almost time in the past 20 years as fears rise over the UK government’s austerity measures.
“In the 35 years since the index began, confidence has only slumped this much on six occasions, the last being in the midst of the 1992 recession,” said Nick Moon, managing director at GfK NOP Social Research.
Meanwhile Hometrack reported that house prices in England and Wales fell for the seventh month in a row in January. The number of new buyers registering with Hometrack’s universe of estate agents fell 9.5% in January, after declining 4.8% in December. In January of last year, the number of new buyers fell 2.7%, which indicates, in Hometrack’s view, that the housing market is facing “more fundamental issues than the usual post-Christmas slowdown”.
The Confederation of British Industry (CBI) reported that UK retail sales grew year-on-year in January but the rate of growth is slowing as the VAT rise takes effect.
The euro continues to push higher across the board after data yesterday showed European economic confidence holding near its highest levels of the last 3 years. Comments by ECB member Lorenzo Bini Smaghi about inflationary pressures caused by imports also helped push the euro to new 2 month high against the dollar. Even the possibility that Belgium could undergo a ratings downgrade as a result of the continuing political deadlock seems to be being ignored by the markets for now, which is somewhat surprising given the Japanese downgrade yesterday morning. S&P cut Japan’s debt rating with a stable outlook has not only knocked the yen lower but also diverted the market’s attention away from the euro zone’s fiscal problems for the time being. It also brings with it a warning that no one is immune from the current debt problems, not even the US. Moody’s warned yesterday of the increasing risks to the US’s own credit rating over the next two years if no action is taken to address its own debt problems.
The US dollar has continued to remain weak, apart from against the yen, after poor weekly jobless figures yesterday saw claims increase by 51k to 454k, well above expectations and durable goods fell for the second straight month in December, this time by 2.5%.
Hopefully today’s release of Q4 GDP figures could go some way to stemming the dollar weakness of the past few days.
Commentary by Tony Redondo
“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”
