Special Report from Currency Solutions

Markets are in turmoil and London is quite literally burning. If this were a script for a film I could think of several Hollywood directors that would snap up the opportunity to produce such a piece. However, rather than offer ammunition for what would be a long term debate we will stick to what we do know. However, even the markets are a volatile, kicking bull at the moment so we it’s a tough call on that front as well. The Aussie continues to slide and it now appears that the Canadian Dollar and South African Rand are following suit. The euro continues to cling on to a fine piece of thread and the Swiss Franc, despite the government’s best efforts has mounted another attack on world markets.

Pound Sterling – UK Markets

Just as I so eagerly portrayed the UK in a way that made us feel as though we were on the road to recovery I have been made to look like a fool by gangs of petulant individuals making a mockery of a city many of us are (or shall I say were) proud of. As our leaders belatedly returned from their holidays, they will have been met with frustration and anger from those who care. How you may be thinking does this all relate to our economy? Well, with MP’s suggesting reduced prison sentences, failing to learn from earlier rioting over the past year and a global message to investors that signals we are failing to control the very basic principles of our frail economy; the government needs to grab the bull by the horns and take control of markets to restore confidence. Despite the unpredictable nature of our markets, sterling remains stable.

US Dollar – US Markets

As President Barack Obama confidently marched up to his dais, the markets waited in anticipation. Little did they know that what was to follow was a sea of red in the ever volatile markets. Obama made an attempt to restore global confidence by stating that despite being downgraded the US will always be a AAA nation. You could have heard the winces in the room as markets, even during this speech markets continues to see red.

Furthermore, Standard and Poor has continued its rampage on the US by downgrading a number of institutions; mainly those that are government backed. This will do little to prevent steam emanating from Obama’s ears as he did his very best to calm fears and restore confidence. The dollar remains on shaky grounds following the downgrade. Sellers beware…

Euro – European Markets

Whilst European markets continued to nosedive, yields on Spanish and Italian government bonds fell for the second consecutive day. The European Central Bank has begun intervening in the markets in attempt to keep borrowing costs down for both countries. However, this has to be viewed as nothing more than allowing a bit of breathing space. Along with the US, the ECB is concerned over the growing issues surrounding Italy and Spain. ECB President Jean-Claude Trichet is looking ever more fragile in his role and has called on eurozone governments to beef up efforts to stem the debt crisis that is on the periphery of entering the core nations.

Other Currencies – Highlights

Rather than focus on individual currencies globally today, there is a clear trend taking place in those currencies that are linked to commodities. The Australian Dollar, South African Rand and Canadian Dollar have continued to fall as investors steer clear. The bottom line is no one will be attempting anything risky at present with the state of the global economy in tatters. Interesting times ahead.