UK Analysis: Public Borrowing Hits Highest On Record In April

Public Sector Net Borrowing hit a record level for the month in April, although upward revisions to receipts growth means borrowing in the last fiscal year was revised down sharply, according to figures released by National Statistics Friday. Public sector borrowing stood at Stg9.955 billion in April, up from Stg8.826 billion in the same month a year earlier, the highest outturn for an April on record, albeit broadly in line with the median forecast of Stg10.5 billion. There was, however, a sharp downward revision to borrowing in March to Stg17.973 billion from an originally estimated Stg23.5 billion outturn. National Statistics said that this was mainly due to higher receipts...full story

German Business Confidence Unexpectedly Drops as Debt Crisis Rattles Euro

German business confidence unexpectedly fell after Europe’s debt crisis rattled financial markets and fueled concerns about the future of the euro. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, eased to 101.5 from 101.6 in April. Economists expected an increase to 101.9, according to the median of 37 forecasts in a Bloomberg News survey. Ifo’s gauge of executives’ expectations fell to 103.7 from 104 The euro has plunged 6.5 percent against the dollar in the past month as policy makers’ pledge of a 750 billion-euro ($936 billion) safety net failed to allay investor concern that Europe’s monetary union could collapse. While a... more story

Economic governance divides France and Germany

Germany's curb on speculative trading has cast doubt on Europe's ability to build the sort of economic governance that many believe is now essential for the euro's survival. Germany The move stunned France and showed how the euro zone's two largest economies are struggling to coordinate policy during the debt crisis that has engulfed the single currency. "France and Germany will have to start speaking the same language or else the euro will disintegrate," said Alexander Law, chief economist at Xerfi consultancy in Paris. French President Nicolas Sarkozy has said repeatedly since the start of the Greek debt disaster that euro zone countries must now establish common...Full  story

Alpari (UK) Launches Free Live Audio Market Commentary Service

Alpari (UK), a leading provider of online foreign exchange (FOREX, FX) trading services and technology, today announced the launch of an innovative live audio market commentary service which is free for its clients. Alpari Squawk is a dedicated audio stream, which covers all the major market-moving stories throughout the trading day, including coverage of economic news and figures as they are released, such as fixed income, interest rates, equities, FX and commodities. The service is managed by First Call, a team of professional market analysts. Alpari Squawk filters the important news so Alpari (UK) clients don’t need to scour several news sources during the trading day. Instead,...More

Merkel’s call for ‘orderly default’ supports EUR shorts

It’s a new blow to the EUR confidence when Merkel calls for an ‘orderly’ default possibility in the Euro-zone and that ‘orderly’ insolvencies of states must be studied. There is nothing orderly about these markets which are moving erratically on ‘fumes alone’. The currency has garnered strength on the fear that the G7 is concerned about the speed of its decline this month. Capital Markets have been preparing for some verbal intervention to support the EUR ‘if the rout continues’. What about multilateral currency intervention? We have not seen that in a decade. With the heavily weighted one-sided bet, surely policy makers would get value for their money on actually intervention? Perhaps they... Details

Europe Crisis in Rescue for Greece Bringing Euro to New Normal

Europe’s debt crisis will depress the euro still further after it declined to the lowest level since 2006, according to UBS AG and BNP Paribas SA. For years to come. For the 16 countries using the currency, that isn’t all bad. A drop over three to four years would benefit European exporters in countries such as Germany, where foreign sales help offset reductions in government spending and restraint by consumers concerned about inflation. U.S. exports, which President Barack Obama says he wants to double within five years, may become less competitive. “The euro depreciation is very good news for the region” because the rest of the world economy is expanding, said Charles Wyplosz, head...Read more

China Officials Say Won’t Yield to Yuan Pressure at U.S. Talks

Chinese officials said the nation won’t yield to global calls to end the yuan’s 22-month peg, damping speculation next week’s U.S.-China trade talks would trigger appreciation. China won’t succumb to external pressure and will modify the currency based on the economic situation, Assistant Finance Minister Zhu Guangyao said in Beijing today. Stability between the world’s major reserve currencies will aid the global economic recovery, he said at a briefing to discuss the May 24- 25 Strategic & Economic Dialogue in Beijing. “Only the authorities of a sovereign country have the right to decide how to form the exchange rate,” Zhu said. Countries should “work to maintain the stability...Detail

IMF Strauss-Kahn: Must Boost Growth In Germany, Europe: Press

FRANKFURT (MNI) - Growth in Europe is "by far" too low, and Germany and other European countries must "urgently" do more to accelerate economic expansion, International Monetary Fund Managing Director Dominique Strauss-Kahn said in an interview published Thursday.


Another situation in which a European country could be on the brink of a financial meltdown cannot be excluded, Strauss-Kahn said. "This all depends on what counter-measures are taken" in countries at risk, he explained to German daily Handelsblatt.

One lesson from the crisis is that "a single currency also requires a coordinated economic policy," he reiterated.

"Growth in Europe is by far too low," he said, citing low productivity as a reason. "Germany and the other countries must urgently do more to accelerate growth."

The 61-year-old Strauss-Kahn is considered a possible candidate for the Socialist Party in France's 2012 presidential elections.

Germanys Short Selling Ban Sinks EUR & Risky Assets

Risk appetite ran to the exits with the AUD, NZD and SEK being hit the hardest. In this environment we’re keeping an eye on the SEK as the small nation remains quite vulnerable to shifts in the global economy. USD, JPY and Gold continue to be supported due to their safe haven appeal. The rest of today’s news grossly centers around Germany. The announced German suspension of naked short selling on EU bonds, credit-default swaps and key banking stocks through Q1 2011 shook risk sentiment and precipitated a sell-off in Asia. The rapid sell off in the Euro through the 1.22 level signals that confidence in the currency is at an all-time low. It must be stressed that the announcement was made solely by Germany and not EU finance ministers. While we suspect other EU nations to follow, the move demonstrates to the market that the EU is just not unified, further undermining support for the Euro. As we’ve seen before, one EU nation can effectively shape policy unilaterally. The EU’s modus operandi of tossing grenades into the market and gauging the reaction remains in effect. Later today, German Chancellor Merkel will comment on the ban and perhaps cite the move’s rationale. Until Merkel lends some insight into the step, the reason for the unilateral action by Germany remains unclear. The ban takes away the most effective vehicle for investors to protect themselves from sovereign debt defaults. The two most logical motives could be to curb the negative effects of speculators creating unnecessary volatility in the marketplace or to politically position the bailout in a more favorable light. Our suspicion is the latter - as the responsibility of speculative activity for Europe’s problems is questionable. Merkel must make the case to Germany and German politicians that the $1 trillion bailout is critical to saving the Euro and that the Euro is critical to sustaining the EU. In order for the bailout to pass, it must satisfy the nation’s constitutional requirements for bailout legitimacy. The German Constitutional Court will rule on the legitimacy later this week and their decision hinges on the Lisbon Treaty’s “exceptional occurrences beyond its control” clause. To pass, the crisis must be painted in a way that traces its beginnings to events outside of Greece – therefore pinning blame on naked short-sellers and speculators could help sell that story. However, if the court does rule that Greece’s problems are homemade, the bailout would be a breach of the Lisbon Treaty and thus illegal. Should this come to pass, the consequences for the Euro would be punishing. For the EURUSD, the bearish trend will continue to a new 4 year low and any rallies above 1.2250 will face significant resistance. We are currently looking to a bearish flag pattern in play on the hourly chart, looking to a 1.2000 target in the coming days.