Newsletter Issue 7 June 2010

Economic Overview

Key notes from Last Week

Last week the major themes were again risk aversion and market volatility.

• Total nonfarm payrolls – according to the US government labor report -  increased by 431K in May with the unemployment rate easing to 9.7% from earlier 9.9%.

• The Eurozone debt crisis and now its contagion on to Hungary and perhaps other Central European economies will keep central bankers reluctant to tighten monetary policy. Australia’s RBA and the Bank of Canada both raised the EC debt crisis as factors keeping them cautious toward further monetary tightening. Both policy statements left the markets expecting no further changes at the next meetings.

• The ECB and BoE have policy meetings next week and they are certain to leave their rates unchanged.

Regional Markets

 The Dubai government, which last tapped global markets in October before a crippling debt crisis unfolded a month later, will meet European fixed-income investors but has no current plans for a bond issue. Dubai's department of finance said on Wednesday the meetings were aimed at updating investors on its economy.

Forex

EUR:  

1. The Euro broke the crucial 1.20 levels for the first time in more than four years on concerns that Europe’s debt crisis is expanding and as US stocks slid more than 3 percent.
2. The possibility of Hungarian debt crisis pushed the Euro to a four-year low against the dollar on Friday as fears reignited about financial frailties of Eastern Europe.
3. Hungarian Central Bank rushed to reassure investors Hungary’s budget was sustainable. It said it had an account surplus and that external financing capacity would remain positive for the next two years.

GBP:  

1. Sterling extended declines against the dollar on Friday, tracking a broad fall in the Euro as a lower-than-expected rise in US jobs data kept investors averse to risl as it suggested the US economy was only improving slowly.

JPY:  

1. The dollar fell vs. the yen on Friday after US non-farm payrolls grew at a slower than expected rate in May.
2. The dollar had earlier retained broad gains earlier on Friday, ahead of expectations of a strong jobs data stoking optimism about future growth in the world’s biggest economy.

 ECONOMIC INDICATORS (07-06-2010/11-06-2010)