Good morning and welcome to today\u2019s foreign exchange market commentary on Friday, the 8th of March. <\/p>\n
The message that Italy sent through its general elections is clear; the austerity measures being pursued by European leaders are not working.<\/p>\n
The euro project, no matter how idealistic it was, was a top down approach. But circumventing the democratic process to encourage unelected technocrats to run the country has only worsened the situation. The fact is; much of Europe is in depression. Italy\u2019s loss of output since the beginning of the crisis is as great as it was during the Great depression of the \u201830s. Both Spain and Greece\u2019 youth unemployment rate exceeds 50 percent. The region\u2019s future is in jeopardy and the social fabric is breaking.<\/p>\n
The economists say Europe must stay on course and things will get worse before they get any better. Political leaders who oppose austerity are branded as populists. But the problem is that the cure is not working. In fact it will take a decade or more to recover the losses incurred in the austerity process.<\/p>\n
Europe\u2019s physical, natural and human capitals are severely under utilised today. Needless to say, a prescription that entails waste on this scale can never be the solution. The oft repeated diagnosis of Europe\u2019s current misery, that the peripheral countries were living beyond their means, is only partially correct. Spain and Ireland had low debt\/GDP ratios and fiscal surpluses before the crisis.<\/p>\n
Rather, greater fiscal federalism, and not just centralised oversight of national budgets could work. Clearly Europe needs far more European level expenditures and latest efforts to cut future spending are surely misguided. Similarly, a banking union with a common deposit insurance scheme or common supervision is grossly inadequate.<\/p>\n
European leaders recognise debt burdens will only grow worse in the absence of growth. And austerity policies are strictly anti-growth. Still, there is no growth agenda on the table. Also lacking is any agenda to addressing Europe\u2019s internal imbalances.<\/p>\n
An internal devaluation \u2013 that is forcing down wages and prices, is unlikely to work. Rather the debt burden of the households, private firms and governments will only become bigger. Internal devaluation, combined with austerity and single-market principle is a toxic combination that results in flight of capital and hemorrhaging of banking system. <\/p>\n
The European project was a political idea to promote solidarity and enhance prosperity. But it has resulted in disharmony and bitterness within and between countries. <\/p>\n
GBP\/EURO \u2013 1.1452
\nGBP\/US$ \u2013 1.4998
\nGBP\/CHF \u2013 1.4167
\nGBP\/CAN$ – 1.5456
\nGBP\/AUS$ \u2013 1.4620
\nGBP\/ZAR \u2013 13.7078
\nGBP\/JPY \u2013 142.97
\nGBP\/HKD \u2013 11.6194
\nGBP\/NZD \u2013 1.8149
\nGBP\/SEK \u2013 9.4968 <\/p>\n
EUR<\/strong>: The euro advanced significantly on Thursday after European Central Bank President Marion Draghi kept the benchmark interest rate on hold and said he expects the region\u2019s economy to stabilise later this year. Draghi said a rate cut is unlikely in April and hoped economic activity would improve given the central bank\u2019s accommodative stance and a strengthening global backdrop. Today sees the release of German industrial output data and markets expect an improvement over last month\u2019s reading. However, keeping in mind weaker than expected factory orders reading, a negative number should not come as a huge surprise. Today\u2019s US non-farm payrolls is expected to have significant influence on the euro crosses. Expect the GBP\/EUR pair to consolidate today.<\/p>\n USD<\/strong>: Sterling jumped over the $1.50 level yesterday after the Bank of England decided not to add further stimulus this month and kept interest rates unchanged. Markets had anticipated a GBP 25 billion QE and positions were quickly unwound as traders adjusted to the news. However, much of gains slipped away by afternoon and sterling dropped well below the 1.15 level against the euro and drifted toward 1.50 against the US dollar. Better than expected ADP number pushed the dollar to a two and half year high against sterling ahead of today\u2019s highly influential non-farm payrolls figures. Consumer credit also rose by $16.2 billion in January, ahead of expectations. On the downside, the trade balance figures worsened in January with deficit widening to $44.45 from $38.5 billion in the month before and pushed EUR\/USD above the 1.310 level again. Today\u2019s nonfarm payroll data, along with overall unemployment rate, will influence the dollar\u2019s movement and expect volatility on weaker than expected releases. <\/p>\n Have a great weekend!<\/p>\n","protected":false},"excerpt":{"rendered":" Good morning and welcome to today\u2019s foreign exchange market commentary on Friday, the 8th of March. The message that Italy sent through its general elections is clear; the austerity measures being pursued by European leaders are not working. The euro project, no matter how idealistic it was, was a top down approach. But circumventing the democratic process to encourage unelected […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[110],"tags":[],"_links":{"self":[{"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/posts\/2571"}],"collection":[{"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/comments?post=2571"}],"version-history":[{"count":1,"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/posts\/2571\/revisions"}],"predecessor-version":[{"id":2572,"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/posts\/2571\/revisions\/2572"}],"wp:attachment":[{"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/media?parent=2571"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/categories?post=2571"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mycurrencytransfer.com\/blog\/wp-json\/wp\/v2\/tags?post=2571"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}