Inflation Threats...

Yesterday's action that was announced by the Feds to provide funds up to $200 billion in Term Securities Lending Facility (TSLF) to primary dealers had its immediate effect on the financial markets.

Investors increased their carry trades bets, while providing the U.S Dollar at the same time with the strength to incline against major currencies…

A disappointing fact though an expected reaction, after the surprise effect did the desired effects on the financial markets, investors and economists both were skeptical over the worthy of such action, as they were still betting the Feds will lower their interest rates by at least 1/2 percentage point next week…

The Dollar dropped back again against majors, the Euro inclined even further against the USD today after the upbeat news from the EU industrial sector, the industrial production rose 0.9 percent in January from a revised flat reading in December, while compared with a year earlier production rose in the 15-nation economy to 3.8%, both readings were better than median estimates, this rise marked the first in three months supported mainly by increased output from Germany the EU largest economy…

The U.K on the other hand released their trade balance for the month of January, the visible trade deficit which measures the trade of goods only was unchanged from December's deficit of ?7.50 billion, while the trade deficit with Non-EU widened to ?4.29 billion. Total exports rose 6.3% to ?19.9 billion, while total imports rose 4.4% to ?27.5 billion; both rises were due to rising food and energy prices, highlighting the BOE concerns over rising inflation as the contribution of the Pound's low value to exports was offset by rising imports' costs.

The economical outlook for both the EU and the U.K economies remain relatively strong when compared to their American counterparts, yet rising inflation remains a major threat to both, the ECB established their stance to be Hawkish, while the BOE are yet to find out the extent of slowing in economical activity.

Both the ECB and the BOE maintained their interest rates steady at 4.00% and 5.25% respectively, but both are experiencing increased uncertainties to their economical outlook, should both find their way through this mess, we can all put our eyes to sleep since they along with China can take the burden of global growth from the United States till the Feds are able to march their economy into safe shores…

Crown Forex

Posted in: Economy,Finance and Investment,Forex