Shake And Twist The Summer Away? 24th April, Fx Uk Forex Update
Vantage FX (http://www.vantagefx.co.uk/) provides a daily overview of the news activity
and announcements currently shaping currency movements across the world. Jay Mawji, the companys head of market analysis, takes a look at news surrounding Eurozone economies on 24th April 2012.
The next couple of days could prove to be vital for the UK, US and European economies. The UK has GDP, which could signal the beginning of a technical recession. In Europe, Nikolas Sarkozy will battle to keep his post on top of France whilst the Netherlands have already surrendered their leader. In the US, the FOMC will meet to discuss operation twist, which is due to expire in the summer.
The Federal Open Market Committee (FOMC) is due to begin discussions tomorrow regarding the current operation twist stimulus policy. Essentially, the US sells short-term securities and buys longer-term securities, which is meant to push down the cost of borrowing. The lower borrowing costs act as a stimulus to lend, which in turn catalyses spending and growth. The current policy expires in June and the rest of the economic world is beginning to show some signs of positive movement. There is an expectation that the FOMC will announce further quantitative easing, although it may not necessarily be in the form of operation twist. A new quantitative easing policy may see the USD weaken.
As the political spectrum continues to change shape in the Eurozone, it is beginning to raise serious questions about whether the stricken area has the political backbone to make it through the crisis. Angela Merkel, once a lynch-pin of the leaders, is now marginalised by her Parliament and has seen her allies begin to fall away. With the change of guard in the Netherlands and Nikolas Sarkozy on the back foot in France, it wouldnt be inconceivable to think that, by the end of the year, Angela Merkel may not be in power at all. The truth is, political stability is required in economic uncertainty and the Eurozone are now open to a lot worse than imaginable before.
Talking of uncertainty, there is a lot of it going around the UK at the moment with GDP figures due out tomorrow. The UK needs a positive figure to avoid a technical recession. Up until the beginning of March, a recession was a foregone conclusion. However, the sunshine and panic buying surrounding petrol shortages may have given the economy a much needed boost. The Bank of England has been cautious about the economic recovery, asking for patience as the UK economy works its way back. With the Eurozone on the brink once again, a sudden shock tomorrow could cause the Eurozone all kinds of problems. Analysts are quietly confident that UK GDP will be positive tomorrow
Take your umbrella tomorrow; it may not be the great summer we are hoping for.
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by: Vantage FX UK
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