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(Please note these rates were as of 10.20am (BST) this morning, rates do fluctuate every 2 – 3 seconds, so please call us for a live rate)
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If you need any other exchange rate, please Contact us
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Main News Daily Update
Despite a slew of domestic indicators yesterday, financial markets saw little change at home or abroad as the approaching quarter-end dominated. Today looks set to follow a similar pattern with few major economic releases for markets to digest. In the UK, January’s index of services provides the first official release for the sector in Q1. But heavy revisions to this series tend to see markets pay only peripheral heed to this release. We will focus most attention on March’s CBI Distributive Trades Survey. There are growing signs of significant weakness in UK high street activity and today’s release provides the first evidence for March. The reported sales index has collapsed in recent months to +6 in February from +56 in December – its biggest two month fall on records dating back to 1983. Expectations last month were for a further decline in March. A drop beyond the consensus expectation of -2 would raise further fears that pressures on households could see consumer spending retrench at a pace that could prove too fast to maintain overall economic expansion. This is one of the key concerns of the MPC. March’s minutes described signs of spending and sentiment deteriorating “sharply”. Although yesterday Martin Weale continued to stress the risks of rising inflation expectations, we will watch comments from BoE’s Paul Fisher later today for further recognition of these risks. The CBI distributive trades survey will probably be of more significance for sterling than the index of services for January, which is seen as both old news and subject to further revision. But anything less than a full retracement of the 1.3% decline reported for December would be seen as disappointing. EUR/GBP managed to hold above 0.88 for most of yesterday’s trading, and although the EUR’s upside may be restricted for the moment this suggests weak UK data could lead to a move to 0.90 before long. In the shorter run, the downside in GBP/USD may be more vulnerable.
In France, Household spending on manufactured goods up by 0.9% m/m in February. Household spending on manufactured goods remained favourable at the beginning of 2011. It increased by 0.9% m/m on real terms in February, after a small decline by 0.3% m/m in the previous month. Car sales remained strong, due to the delayed effect of large orders at end-2010 before the end of the cash-for-clunkers bonus. After surging in Q4 2010 (+16.4% q/q), sales started to decrease in January (-6.4% m/m) but rose slightly in February (+1.0% m/m). Year-on-year, they were still up by more than 13%. Total spending also benefited from strong purchases of both households goods (+0.9% m/m) and textile products (+4.2% m/m) during the sale season. By contrast, purchases of other manufacturing products declined slightly after a rebound in January. All in all, the data are favourable for the evolution of total consumption in Q1 2011, partly because the correction in car sales has not really started yet. With other sales also well-oriented, the carry-over for Q1 2011 growth of spending reached 1.4% q/q in February. The resilience of household consumption is in line with the evolution of business climate in retail trade. According to INSEE, confidence in that sector was very high at end-2010. It started to decline by the beginning of 2011, though remaining at favourable level (103 in March). Looking forward, the outlook for private consumption remains mixed. A correction will necessarily take place on car sales. Furthermore, surveys confirm households are highly concerned by inflation. Indeed, few purchasing power gains are expected in the coming months, unless there is a strong acceleration of employment growth. The Irish banks are preparing for the announcement of new tougher stress tests this Thursday. The trend of ever-increasing loan loss estimates is set to continue. Official sources have indicated that the total costs could be anywhere between the EUR10bn already flagged in the EU/IMF programme for the immediate recapitalisation and restructuring of the banks, and the total EUR35bn earmarked for banks in the programme. It is reported that the ECB will announce the creation of a new medium-term liquidity facility, tailor-made with the Irish banks in mind. The Irish Government remains keen to keep the issue of senior bondholder losses at the forefront of the current discussions, although this may only be a negotiating tactic given the stated reluctance of the ECB to entertain such a notion. In Germany, Inflation was unchanged in March (to 2.1%). CPI inflation was unchanged in March (at 2.1%) and is still at its highest level since October 2008. Harmonised inflation (HICP) was also unchanged (2.2% in March). Regional data, used to estimate the preliminary CPI, showed that energy and clothes prices underpinned inflation. However, inflation slowed in the food sector. Over the month, prices rose by 0.5% (after +0.5% m/m in February). Regional data suggest that prices decreased in leisure and food sectors. However, they rose in clothing and energy sectors. Inflation should increase in the coming months. The rise in food and energy prices should underpin inflation in the coming months. This increase, which should pass into other prices, and the positive outlook for private consumption should underpin core inflation. However, it should remain moderate. Indeed, German firms should record further productivity gains.
Markets will focus on the ADP Employment Report as today’s key international release. Lloyds TSB forecast a rise of 200k on the month as labour market conditions continue to show signs of improvement. This indicator is a teaser for Friday’s non-farm payrolls release. Although it has exaggerated the pace of official private sector job creation recently, last month’s 25k overestimate was the closest in just over a year and markets will be encouraged by another good report today. A relatively quiet day yesterday left the USD little changed after early gains, with the weakness in house prices and consumer confidence combining to minimise the impact of more hawkish comments from Bullard. The actual chance of the Fed not following through with the rest of QE looks very low, as there is only one meeting before June and it seems very hard for the data to be strong enough in the next three weeks to change the minds of Bernanke and the dovish majority. There is some scope for the USD index to make further progress towards the early March high at 77.38, but for the moment gains seem most likely to be driven by JPY and CHF weakness.
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The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The author(s) cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
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