Sterling has started the day trading lower against the USD and level vs. the Euro as risk aversion continues. UK government spending figures out yesterday did little to support the pound overall as the country’s debt as a percentage of GDP came out at 62.3%, a record for the month of October. Public sector borrowing which excludes financial sector intervention fell to £6.498bn from £7.717bn highlighting the government is still on track to deliver its promised for debt reduction. The Bank of England minutes out this morning showed that all nine MPC members voted for no change in monetary policy but this does not eliminate the prospect of further QE in the coming months. BBA mortgage approvals came out slightly higher than expected at 35.3k vs. 32.3k forecast.
Currency markets were again influenced by events in Europe yesterday and initially the Euro rallied on the back of positive trading and the International Monetary Fund (IMF) raising it’s lending facilities to provide additional aid to debt ridden European countries. A high level of uncertainty in this area of the world meant investor confidence and buying of the Euro was short lived made worse by a potential rescue package being prepared for Dexia Bank between France and Belgium. This adds to continued speculation over the financial position of France and Italy, two major players in Europe that investors will be watching closely.
Spanish debt auctions fail to impress
The USD has started the day trading well, managing to grab nearly 1% against the Euro and half a percent against the pound. This comes as US GDP figures were revised down for the third quarter to 2.0% from 2.5% triggering safe haven demand for the USD, despite this data showing further weakness in the US economy. Increased discussions of stimulus plans will be seen over the coming days with president Obama at the forefront. Major data out this afternoon includes core durable goods and unemployment claims.