Today's Highlights

FX Market Overview

The major themes remain the same. Is the Eurozone going to survive the latest crisis, will France be downgraded, will Eurobonds become a reality, is America’s economy ever going to recover, just how many people will be arrested in  connection with the riots and exactly how many people in the UK would like to slap Sally Bercow?

Monetary Policy Committee member, David Miles who has recently voted for further quantitative easing in the UK, has now said that this will not be necessary in the short term. Sterling got a boost from his apparent change of stance but there is speculation that the BOE will have to cut interest rates again to 0.25% before the UK recovery is assured.  Sterling had a fairly flat day overall but today may be a different story. UK inflation numbers are released this morning and a slight rise is forecast. That would be at odds with the notion of an interest rate cut but the lack of economic growth would suggest further loosening of monetary policy would be a positive.

The US Dollar had a pretty good day in spite of the Empire State manufacturing index declining to minus 7.72 in August from minus3.76 in July That was well below expectation and further highlights the fragility and regional variation in the US economy. That may account for the drop in foreign investment in US Treasury certificates. The TICS data, which outlines the direct inward investment into that market, showed a sharp drop in June, which would suggest overseas investors are finding other safe havens and we know that because the Swiss Franc and Japanese Yen are ludicrously strong right now. It also suggests that US investors are buying home grown Treasuries and that would suggest nervousness amongst American investors. Not too surprising perhaps.

The Reserve Bank of Australia released the minutes from its last meeting overnight. In essence, they appear to believe that the Australian economy is on a positive track and, were it not for the worrying economic conditions in overseas markets they would almost certainly be raising interest rates at the moment. Even without the lure of higher interest rates the Australian base rate is still attractive, so the Australian Dollar strengthened a little after the release.

Today’s big news story may prove to be a totally damp squib. German Chancellor Angela Merkel is meeting French President Sarkozy to discuss the state of the European and Eurozone economies. There was a lot of expectation that they would discuss the potential for a Eurobond; bonds issued on behalf of the whole of the Eurozone rather than individual states issuing their own. The French and German camps have made it pretty clear that this is not on the agenda but it hasn’t stopped the debate.  That level of increased financial integration is desirable to some and anathema to others; including most German MPs so the debate will rage on regardless although the chances of a successful outcome are limited. Assuming nothing is announced on that front, the Eurozone trade balance may well be the major talking point and that is expected to be slightly Euro positive but this morning’s release of poor German economic growth has had exactly the opposite effect. At 0.1% quarterly growth, this was the worst reading since Q1 2009 and well below the 0.5% market forecast.

And just imagine for a second that you are a looter. I know that might make you feel physically sick but bear with me. You decide to take advantage of the riots in the streets of London to burgle a house near yours. You find a scaffold pole and prise the bars off the windows of a downstairs flat and steal the laptop and some other stuff you find inside. A few days later, the police arrive and arrest you but you cannot fathom how they found you. There aren’t any CCTV cameras in the street and no one knew you were a thief. All of that may be true for one opportunist scumbag apart from the fact that the laptop was owned by a computer techie called Greg Martin who has worked with the FBI on IT security. The laptop was fitted with software which gave its owner a geographical fix on its location as soon as it was fired up and then used the webcam to shoot live pictures of you using the machine and beamed them to the owner’s iPhone. Greg called the police and directed them to you. What an excellent result. The only problem is that I now want that software on my car, laptop, mobile, bike, wallet, dog........