Halifax have this reported this morning that according to their index house prices rose by 0.2% last month against an expected figure of -0.5%. This is against the previous Nationwide figures which showed a definite contraction in prices.
Halifax did however report that they anticipated prices to be static throughout 2010 although the improved economy and low interest rates have allowed a lot more first time buyers to enter the market.
This was great news for the pound which saw an initial leap against the dollar up to 1.5500 GBP/USD just over a point higher than yesterdays close. The pound also rose just under a point against the Euro to 1.2180 GBP/EUR, it has yet to be seen whether these knee jerk gains can be sustained or not.
The Euro is still continuing to suffer today, reaching a lifetime low against the Australian Dollar although many investors are still unsure about whether yesterdays sell-off in the euro meant the tide was turning against the common currency. Until the market trend is clear, investors will be reluctant to make any bold moves as they decide whether the sell-off in the euro is a one-day wonder or the start of a more significant correction.
U.S. gold futures stayed at moderately higher levels on yesterday peaking just above levels last seen in June. Renewed concerns about European bank debt sent investors looking for safe-haven assets and the precious metals and USD were the obvious contenders.
London’s afternoon gold fix was set higher at $1,256.75 an ounce. Currency transfers remained light all day, as many American participants were still enjoying a long bank holiday weekend.
World stocks retreated and the euro weakened broadly after a Wall Street Journal report said recent stress tests of the European banking sector underestimated some lenders holdings of potentially risky government debt. Some economists are saying that the European Central bank have been cooking the books in order to conceal certain toxic assets which might’ve sent investors running a mile from the beleaguered single currency.
In North America congress showed little willingness to help President Barack Obama approve $350 billion in measures to boost the economy and with elections less than two months away Obama’s plans for billions of dollars in tax breaks for businesses are policies Republicans would typically embrace, but the party has little motivation to give the Democratic White House a win. By cutting their noses off to spite their faces they could imperil the already fragile economic recovery of the worlds largest economy and prompt another drop in consumption.
Obama will announce his plans to stimulate the sagging U.S. economy in a speech on Wednesday in Cleveland.
The Bank of Canada is expected to raise its avant-garde interest rate Wednesday but the central bank’s future course is anyone’s guess in the face of a tepid recovery, although the high prices of commodities should help the Canadian Dollar to gain some ground. The Canadian Dollar seems like it’s in a win-win situation in the medium term as it will benefit from both recovery of the global economy from higher oil revenues and also if the American economy does slow down then it’s lower risk appeal and higher yields could help to raise the value of their currency.
Canada’s bank governor Mark Carney has said that post-recession rate increases are not “pre-ordained.” But, with the bank’s overnight rate setting still near historic lows, many analysts predict Carney will hike the rate to 1.00 per cent, up from the current 0.75 per cent.
Many economists have doubted the wisdom of this minor upward rate hike, citing the Japanese economy as an example of rates being raised too fast and too soon after a recession, this along with the disappointing economic conditions, particularly in the United States have led some economists to say that Carneys policy is misguided.
Investors in the Canadian Dollar have shown their support for the rises with the Dollar gaining strength by over 3 points after the last hike.
Carney’s rhetoric still remains cautious “Coming out of a recession of the magnitude we just had, one would expect very rapid growth and instead we’re getting fairly slow growth,” said United Steelworkers economist Erin Weir, who argues that the central bank should keep interest rates as low as possible to improve business conditions. “To really put a dent in unemployment, we need much stronger economic growth,” he said.
