This weeks data and the effect on exchange rates
A New Week
Already more job losses announced. Steelmaker Corus has confirmed that it is cutting 3,500 jobs worldwide, including about 2,500 in the UK. The announcement comes after Corus, like all steel firms, has seen a substantial fall in demand. Corus, a subsidiary of India’s Tata Steel, currently employs 24,000 people in the UK and 42,000 worldwide. This pushes up the jobless total in the UK now standing at nearly 2 million. David Blanchflower, the member of the Bank of England’s monetary policy committee (MPC), said in an interview that we would see a rise in unemployment to over 3m from the current standing of 1.92m in a year’s time. Expect further Sterling weakness as jobs go in the UK
Interest Rates
Blanchflower, who consistently warned of the danger of recession, believes UK interest rates should “obviously” head down to America’s near-zero level. He said UK rates had to head down to the 0% to 0.25% level set by the Federal Reserve in America.
He denied that rate cuts had lost their impact but welcomed the fact that further tools, including “quantitative easing” – artificially boosting the money supply – would soon be at the Bank’s disposal. Though no decisions have yet been taken on this, it is expected that MPC members will have the say on when, and by how much, quantitive easing should occur. According to a survey of analysts by Ideaglobal.com, the financial research company, analysts expect the Bank of England to cut interest rates from 1.5% to 1% when the MPC meets on February 4-5.
As regular readers will know, lower interest rates tend to lead to a weakening of the currency concered, so Sterling remains under pressure.
THE WEEK AHEAD
Tuesday sees consumer confidence data releases for the US.
Wednesday sees CPI data released for Germany and Australia as well as the Federal Reserve of America’s and the Reserve Bank of New Zealand’s interest rate decision.
Thursday sees data released for consumer confidence in the eurozone.
Friday sees GDP and personal consumption data released for the US as well as eurozone CPI data and Bank of Japan minutes. If there is any deviance from the expected data values then expect exchange rate movements in the respective currencies.
This is a brief summary of todays report. Click here to read the full report on our main website
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