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Stu1

Us Dollar Crumbles: Sterling Takes The Cake

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below is from the Custom House email news letter sent out each month.

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US dollar crumbles: Sterling takes the cake

Market Highlights:

• US dollar crumbles: Sterling takes the cake

• Still no squealing from the PIIGS

• The chosen Milliband takes a stand against tough austerity

US dollar crumbles: Sterling takes the cake

Sterling rose to a six week high versus the US dollar on Friday, prompted by US Durable goods orders dropping 1.3 percent in August. Markets had expected orders to fall 1.0 percent from a previously reported 0.4 percent gain. This poor figure encouraged the new selling dollar trend to forge full steam ahead and gave sterling a much needed boost. Do not be fooled however, this welcome move has nothing to do with the pound’s own strength. Its poor performance against all other currencies bears testament to this. Looking at sterling’s sluggish performance elsewhere serves as a reminder that the upcoming austerity measure announcements in the next few weeks could see it sold off more aggressively than we have seen for some time. House prices are declining and a Reuters poll of economists and property analysts expect them to fall another 5%. UK banking share prices also slipped last week as the faltering global recovery batters investor sentiment in those financial institutions. Like the US, the UK’s recovery seems to be in a dead cat bounce.

Billionaire investor and shrewd market analyst Warren Buffet said last week that the US is still in recession. Recent figures continue to lend support to his claim. It seems we are only a couple of Fed meetings away now from QE2. However, Buffet cautions against this route saying: “We've used up a lot of bullets, and we talk about stimulus. But the truth is, we're running a federal deficit that's 9 percent of GDP. Again this is reminiscent of the UK situation. An 11% deficit and more quantitative easing likely. Not a good combination.

Data this week for the UK and the US looks unlikely to be positive. UK houseprices and mortgage lending will give a good indication of how far the housing market is slipping. Whilst US confidence, PMI and unemployment could see the dollar under further pressure.

Still no squealing from the PIIGS

German IFO data on Friday ensured that the PIIGS remain quietly in their pens. The glow of Germany’s growth seems enough to blind investors to the issues that lurk beneath. Generally the IFO figure is a good indicator of health across the euro zone but we know better. No structural changes have been made and those periphery countries continue to struggle. Another successful bond auction, this time by Portugal, leaves me somewhat incredulous that this debt is being happily funded by the markets. But this seems set to continue, with the euro enjoying its reign as top dog of the FX markets. Sentiment is still the driver du jour and it dictates that the euro is still a buy.

Data out this week is unlikely to hold any nasty surprises so do not be surprised to see the euro extending its gains.

The chosen Milliband takes a stand against tough austerity

Beating brother David by a wafer thin margin this weekend, Ed Milliband has been declared the new leader of the opposition and will now fight to get the Labour party back in the public’s good graces. He stated on Sunday he supported "cautious" cuts in the budget deficit, saying government plans for spending cuts were economically dangerous and could inflict huge damage on society. He must now quickly map out a credible deficit reduction strategy of his own. His indication so far is that he backs existing party plans to halve the deficit over four years, but sees a greater role for taxation rather than heavy reliance on spending cuts. He feels the UK is still in need of stimulus, echoing the views of BOE chairman Mervyn King. He has a lot to prove to skeptics who feel his affinity with trade unions could compromise policy.

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Looking at sterling’s sluggish performance elsewhere serves as a reminder that the upcoming austerity measure announcements in the next few weeks could see it sold off more aggressively than we have seen for some time.

The markets didn't like Brown's era of mad spending and neither do they like Cameron's era of austerity. So we're fukced either way!

House prices are declining and a Reuters poll of economists and property analysts expect them to fall another 5%

By the end of the year at least and since housing is the UK economy we're doubly fukced.

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The markets didn't like Brown's era of mad spending and neither do they like Cameron's era of austerity. So we're fukced either way!

By the end of the year at least and since housing is the UK economy we're doubly fukced.

Unless you've got gold, then you're onto a sure fire winner :)

Edited by General Congreve

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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