Daily Insight

The Thanksgiving holiday has seen a lot price action surrounding financial markets and yesterday the Dollar dropped to the lowest level ever recorded versus the Euro amid speculation that U.S credit market losses will force the Federal Reserve to lower interest rates. The FOMC have lowered the benchmark lending rate by 75 basis points over the past two months and the Dollar is poised to record its biggest weekly decline since September after both Merrill Lynch & Co and Citigroup Inc said that the Fed will need to lower interest rates by 1 percentage point. The dwindling sentiment surrounding the U.S currency is likely to continue over the coming weeks as the worst slump in housing for over 17-years combined with slowing economic growth may encourage policy makers to lower rates next month. U.S house prices fell in a third of all U.S cities in the last quarter as tighter lending conditions combined with a slowing economy saw sales decline 14% nationwide. The report from the National Association of Realtors said that prices dropped in 54 metropolitan states in the third quarter while sales tumbled 2.0%. Declines in sales and home values signal that the housing slump may extend into the next year, which mirrors the slowdown 18-years ago that ended with the recession in 1991.


The Pound rose to a high of 2.0750 against the Dollar overnight but has fallen significantly in early trade this morning after UK economic growth unexpectedly slowed to the weakest pace in a year during the third quarter. Growth in service industries cooled and factory production stalled in the in the three months through to September as UK gross domestic product rose 0.7% despite initial forecasts of a 0.8% increase. However, according to the report from the Office of National Statistics, the annual pace of growth was 3.2% from this stage last year, which is the most since 2004, although according to reports from the Bank of England the economy is slowing.

The Euro rose to a fresh record high against the Dollar yesterday, peaking at 1.4873 before closing 0.1% lower at 1.4840 amid another round of positive economic reports, which showed that German consumer spending rose 0.5% in the third quarter. Despite a strong currency and the inevitable impact on export growth, the German economy continues to expand as companies and consumers increase spending and corporate investment. Europe's largest economy has expanded in the fastest pace since 2000 but there are signs that growth is slowing after the collapse of the subprime mortgage market and the subsequent upward pressure on credit costs. However, the European Central Bank has retained a staunchly hawkish stance on monetary policy as inflationary pressures continue to mount following the upward swing in commodity prices. A separate report yesterday showed that German import prices increased by the most in almost a year in October, led by the overwhelming increase in oil prices over the same period.

Data Released 23rd November

EU 09:00 Current Account (October)

EU 10:00 Industrial Orders (September)

written by Adam Solomon