Euro Pressure Continues
Festive cheer in the market seems to be running out as we move towards the end of the first trading week of 2012. Disappointing Italian and Spanish PMI data more than offset a decent German figure and the Euro-zone is looking more and more likely to be heading into another recession.
The Euro was under pressure for most of yesterday as risk was dumped and the US Dollar strengthened. The theme is continuing this morning as the single currency continues to be sold; European banks continue to make headlines for the wrong reasons as they park newly created ECB cash back at the central bank rather than lending or investing it in the real economy.
Retail gloom continues to hang over the UK with many of the retailers reporting crucial Christmas figures this week. NEXT shares were pummeled after they reported disappointing sales over the festive period and set a gloomy tone as we wait for results from rivals M&S. John Lewis were a ray of light in the gloom, posting impressive sales growth compared to last year, but most if not all retailers are suggesting that economic conditions remain a real concern and are expecting a challenging year.
The Pound has opened the year in much the same way as it finished the last, namely taking a back seat to the Euro and Dollar with economic fundamentals remain less of a driver than politics.
Data from the US this week has been mixed, ISM manufacturing and Auto sales both showed growth month-on-month ahead of the consensus estimates but factory orders disappointed coming in on the lower side of estimates.
The market is hoping for a clear sign of the economic picture on Friday from the Non-farm payrolls, either showing the recovery continuing or a worsening picture and the prospect of further QE this year. More likely is that the number shows the US economy to the chugging along slowly, leaving both the Fed and the markets disappointed.