Pledges from the Portuguese Finance Ministry yesterday were not adequate enough to stop Fitch from stating this morning that Portugal may be downgraded if the fiscal consolidation is insufficient, along with certain warnings for the UK, Spain and France.
Fitch are concerned that Greece may not be successful in implementing its budget and scepticisms continues to rise over how or rather if the EU can steer through all the legal obstacles to form an European Monetary Fund, while critics are of the view that the IMF remains the more viable and appropriate institution to carry out such a function.
In spite of this, there does seem to be a growing sense of optimism in the Euro Zone especially with Switzerland having a positive effect on the region with a report showing that retail sales rose much higher than forecast last month. Investor’s confidence also appears to have risen slightly better than expected.
As per my last article about peace in Europe and Greece, it seems that whilst Greece may have avoided a full blown crisis, the market will not tolerate this occurring again. Demands are surely going to be made for an improved system of fiscal controls and greater prudence from all EMU members and until there is evidence of this, downside pressure will surely remain.
The GBP opened soft then opened completely following a report from Moody that the UK faces a difficult balancing act in deciding how and when to reduce support for the banking sector. Soft RICS housing market report suggested that January weakness may be more than weather related and then poor Trade numbers which showed that the United Kingdom’s trade deficit widened the most since August 2008 as a result of lower exports. The weaker sales of chemicals and other commodities were the main reasons behind the falling exports, and this shows that overseas traders were not encouraged by the weak pound.
In January, visible trade balance widened to -7987 million pounds from the revised prior deficit of 7010 from 7278 million pounds while analysts were presuming that deficit would narrow to -7000 million pounds.
The GBP also dropped as a poll for The Times showed that Labour and the Conservatives are neck and neck in the marginal seats that will determine the outcome of the general election, if there’s anything the markets hate its uncertainty and the GBP certainly has plenty of uncertainty surrounding it.
The Bank of England paused the 200 billion pounds program towards buying gilts, and this measure was successful in helping ease the economic recession in the UK as we have been witnessing improvement in the dominate sectors that support GDP while the severe decline in general price levels have eased. The UK expanded by 0.3% in the fourth quarter.
Beta 2 Lane Clark, Beta 2 Forex commentary from Beta 2 Lane Clark and Jovi Overo Beta 2 