Financial Resource

Good afternoon, there has been a fair amount of discussion on the wires this morning as to robust ability of the coalition’s austerity budget in the currency markets from Moneycorp, Currencies Direct, Voltrex and TorFX. Today is primarily a continuation of yesterday’s feelings towards the UK and the Euroland. It is the turn of the Ratings Agencies to voice their concerns over the UK’s austerity measures and the possibility of the dreaded ‘double-dip’. The Chinese agencies have set the precedent by downgrading many Western Economies meanwhile S&P and Moody’s are ‘wary’.

MoneyCorp

Circumstances gang up against sterling

That the Japanese yen can perform so well (sometimes) with only an AA rating ought to be a consolation for sterling. But the pound is a delicate flower, prone to shrivelling up in the face of adversity. When S&P issued its warning yesterday sterling ran behind the sofa. It had done the same thing earlier in the day after the delayed publication of the figures for first quarter gross domestic product (GDP). As expected, GDP expanded by +0.3% in Q1. That was fine. But there was also a surprise in there. Earlier estimates for the peak-to-trough decline in GDP had put the figure at -6.2%. The final revision updated that figure to -6.4%. There was also confirmation that, in volume terms, the 4.9% fall in calendar 2009 was a record annual drop.

Rubbing salt into sterling’s wounds was Monetary Policy Committee member Adam Posen. He was quoted by a regional newspaper as saying ‘There is a chance we could slip back into recession.’ Estate agents fear he might be correct: the RICS house price balance fell from 21% to 9% in June. They believe rising supply and falling demand will lead to a renewed decline in prices.

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Currencies-Direct

Inflation The Key For The MPC?

Sterling weakened yesterday after the S&P said it was maintaining its negative outlook on UK’s AAA credit rating. Data released from the UK included a survey by GfK, which showed 58% of U.K. households expect economic conditions to deteriorate further, with nearly two-fifths of the respondents looking to cut back on consumption.

The euro consolidated well below two-month peaks against the dollar as investors were cautious about the single currency ahead of Greece’s return to capital markets for the first time since late April. This along with Moody’s cut in Portugal’s rating to A1 with a stable outlook is going to continue to weigh on the euro in the short term and doesn’t bode well ahead of the bank stress test results due next week.

The main focus today will be on UK CPI which is expected to moderate from 3.4% YoY to 3.1% YoY in June. Inflation figures will be key for future rate decisions from the MPC with committee member Andrew Sentance voicing his concerns recently on rising inflation.

http://www.sendmoneyhome.org/currencies-direct

Voltrex

Chinese rating agency strips Western nations of AAA status, accusing

Anglo Saxon competitors of ideological bias in favour of US, UK, Germany

and France.

– BP to pay billion less Tax over next 4 years hitting rev’s of UK and US

– US Equities close near their highs.

Pound:

The U.K pound declined on Monday against the USD after Standard & Poor’s affirmed the country’s top-shelf credit rating but re-iterated its negative outlook on the U.K again warning its debt level could threaten the country’s coveted AAA rating. Chancellor Osbourne must be left scratching his head as after the generally well received emergency Budget he must have thought he had done enough to stop this type of murmurings from the debt agencies rattling their un-elected chains! It was as if to say “Not bad but your not out of the woods yet and we are still most definitely watching.

DATA : UK Retail sales ; UK RICS ; UK CPI ; UK RPI

Euro:

The spotlight returns to European financial woes, after several weeks in which investors concentrated on the health of the US recovery as Euro-zone governments, including Spain and Greece, gear up to sell around EUR30 Billion in debt this week. Investor interest getting drawn back to Europe will hopefully not highlight any fresh issues and problems.

http://www.sendmoneyhome.org/voltrex-fx

TorFX

The Pound, initially, weakened for a third straight day against the U.S Dollar, dropping under the main support level at .5000, as investors become increasingly concerned over the fragile economic recovery in the wake of the fiscal tightening to rein in the deficit. Has the government sacrificed economic stability to reduce the shortfall in the budget?

That’s the question being asked by investors. The wave of optimism surrounding the coalition government has all but ended it would seem, while George Osborne’s emergency budget drew worldwide acclaim with the most dramatic public spending cuts seen since Margaret Thatcher’s government in the 1980s. The Pound subsequently gained 6% against the Dollar since May 20th, but in the past week, the economic data released has increased the prospect of a “double-dip” recession.

UK stocks swung between gains and losses following the biggest weekly increase in a year. Shares in BP Plc rallied amid speculation that Apache Corp may buy about billion worth of the oil producer’s assets, as the struggling company looks for reserves to pay for the biggest U.S oil spill in history.

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