I am guessing all facebook users are feeling a tad inadequate this morning. A cross eyed possum in a German zoo has already accumulated more than 80,000 friends on the social networking site even before he goes on public display. Go on I’ll wait while you Google it and until you have counted your own friends ....................................................................................................................................................................................................... Done that? Feel any better? Never mind. Let’s move on before we all feel unloved.

The US Dollar hasn’t been short of friends lately but it lost a few yesterday amidst mixed data. US wholesale inventories data showed the first decline since 2009 and yet Philadelphia Fed President Charles Plosser forecast strong growth data for this year and next but suggested a slowing of fiscal stimulus would be necessary to temper growth as the economy started to properly recover.

Elsewhere, the Euro was being pulled from pillar to post as Portugal, which is normally overlooked, became the centre of attention. After yesterday’s slightly improved government debt figures, we anticipate fireworks around today’s Portuguese government bond auction. It is anticipated that the interest rate Portugal will have to pay will be elevated and that will bring further talk of pressure from the EU for Portugal to accept financial support from the EU at lower interest rates but whether Portugal will want to be in hock to the EU is another question altogether. However, while Japan and China continue to express a desire to own EU debt, we ought to see sufficient demand for the Euro but whether it is enough to stop the Euro weakening is open to debate. Nevertheless, if today’s auction is oversubscribed, we could well see a short term rally in the value of the Euro so Euro sellers should be ready to take advantage.

Sterling had a fairly flat day against the US Dollar and Euro with little data to ruffle traders’ feathers. The British Retail Consortium shop price index showed prices rose 2.1% in the year to December. With little else to focus on, that was enough to stabilise the Pound. Sterling did gain against the Australian Dollar and slightly against the New Zealand Dollar. The Australian Dollar’s weakness is easy to understand if you watch the pictures of the worst floods in 120 odd years and both the Aussie and Kiwi Dollars are suffering as China looks to slow its imports. However, overnight news that Australian home loans picked up in November was greeted with a little AUD strength. Traders appeared to ignore the drop in investment lending.

The Canadian Dollar is doing rather better as Australian commodity output is hit and Canadian production grows in demand.

The Swiss Franc was in the news as it weakened on rumours that the Swiss National Bank was either intervening or threatening to do so to weaken their currency. The exceptional strength the Swiss Franc has suffered in the last couple of years is understandable; the Swissie has always had an allure as a safe haven in times of crisis. However, it is damaging Swiss business and that is causing concern at the highest level in the Swiss authorities.

And in a move seen as offering more flexibility, the Chinese authorities have allowed some US banks to trade in the Yuan outside China for the first time. The Bank of China’s US office will trade in the US market and they expect 20-30% of invoices for Chinese exports will be settled in Yuan in 5 years time. The current level is less than 1%. No news on whether UK banks will get the same opportunity but we shall see.

Looking forward, today’s big news stories include UK trade balance, EU industrial production, US mortgage applications, US import prices and Canadian housing data. The day is topped off by the release of the Federal Reserve’s Beige book; a regional look at the economy and a component part of the agenda for the next Fed interest rate setting meeting. Busy busy busy.

And finally, this worldwide phenomenon of mass deaths amongst wild animals has another chapter today. A mass of dead gizzard shad fish washed up on shore around Chicago harbour and 100 birds dropped dead on highway 101 in California. Has anyone checked the chemical weapons labs for leaks yet? This is becoming ever more bizarre.


Quote

"I used to think that the brain was the most wonderful organ in my body. Then I realized who was telling me this."
Emo Phillips