Latest news on European Mid Morning Update 5th June 2008
| Waiting for the postman News from Europe: The U.K. housing market is looking more and more like following the U.S. with the Halifax Building Society reporting a drop in prices over May of – 2.4% to bring the YoY loss to -3.8%. Coming on the back of the problems in which the Bradford and Bingley find themselves and the growing number of foreclosures, the warning bells are ringing around the Bank of England. At this point it is just a healthy pullback in what had been a price bubble but given the background of a weaker financial services industry and high inflation the risks are there to be seen. It is unlikely the BOE will react today by slashing interest rates as other numbers do still confirm there is an element of growth still in the economy as a whole, the OECD just yesterday forecasting this year to return a 1.4% GDP. However, if there are any signs of an acceleration in the contraction then it is also likely the BOE would follow the example of the Fed. For now Cable is steady but is showing signs of weakening further later today.
April May The ECB & BOE are due to announce their rate decisions
Not really. The market normally awaits these events but ends up shrugging its shoulders to wait for the next piece of news. The OECD probably summed up the situation by recommending that both banks retain an unchanged policy. At this point there is little to be gained by hiking rates. However, if they do so there may be more to lose with consumer demand already down the pan and many wondering whether they can meet monthly payments. By retaining current interest rate levels the intent is to make sure that the economy moderates at a gentle pace with the least disruption and allows for an eventual basing in the economy from which to build the next upswing. The biggest problem faced in Europe is in the U.K. which is facing its own housing crisis. Not currently bad as the U.S. but definitely at risk. However, while the economy is moderating it is not collapsing and doesn’t have the problems faced by the U.S. The Northern Rock and Bradford & Bingley have been rather unsettling hiccups but have been handled in a way that should ensure the least damage. So unchanged rates are likely and this should keep the market holding broadly to the range of the past two days and awaiting tomorrow’s non farm payrolls from the States to generate the next larger move.
USDJPY EURUSD USDCHF GBPUSD Spt: 105.10-30 1.5361-83 1.0390-30 1.9478-98 See Also
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