Ahead of the US Presidential election, the euro took centre stage in the markets yesterday, albeit for all the wrong reasons as it fell to a two month low against the dollar but was largely unchanged against the pound as bad economic data continues to dominate the headlines on both sides of the channel.
In the UK, Markit published yesterday the purchasing managers´ index (PMI) for the services sector in the UK for October at 50.6 points, versus a figure of 52.2 for September. The services sector dominates the UK economy thus this slowing pace of expansion was not welcome new for the government or the pound.
The report highlighted two areas of concern. Firstly, the rate of growth of new business slowed markedly during October and secondly, staffing levels were reduced for the second month in a row.
Meanwhile the euro came under pressure as concern grows about developments in Greece, Spain and France.
In Greece, the coalition government brings its latest austerity measures before parliament in Athens warning that anything other than a positive vote could force the country out of the euro.
Despite the warning, the smallest party in the coalition government, the Democratic Left has already pledged to vote against the €13.5 billion in cuts due to its opposition to further labour reforms. The vote on the austerity package may come as early as tomorrow, Wednesday 7 November but even assuming it passes this parliamentary vote, the Greek government will then face a crucial vote on its 2013 budget on Sunday, 11 November. Approval of both measures is needed to achieve the release of the next €31.5 billion in rescue funds from the next bailout tranche.
In Spain, data from the public job agencies of the 17 Spanish regional administrations revealed that 128,242 more Spanish residents became unemployed during October, well ahead of analysts’ projections of ‘just’ 90,500.
Meanwhile, the International Monetary Fund (IMF) has told France to take urgent measures to head off national economic decline in a blunt warning that the country risks being left behind as southern Europe embraces wholesale economic reform. The IMF also said rising tax rates are undermining France as a place "to work and invest" and leading to a "significant loss of competitiveness". "There is a risk it will get worse if France does not adapt at the same pace as its trading partners in Europe, notably Italy and Spain," it said in a warning to the policies being implemented by new French Premier Francois Hollande.
Overnight, the Reserve Bank of Australia (RBA) surprised the markets by holding Australian interest rates unchanged whereas most analysts had expected a further interest rate cut to boost the domestic economy as the mining sector continues to slow down due to the slow pace of world economic growth.
Money Transfers to America:-
With better than expected unemployment data out of the US on Friday afternoon and the end of the political uncertainty from today’s US Presidential vote, the dollar has enjoyed strong gains across the board of late and historically, does tend to strengthen in the post election period so clients with a dollar requirement may need to consider securing an exchange rate sooner rather than later in order to prevent any further damage to the rate of exchange.