Pound Volatile Before Chancellor Presents Autumn Statement

The pound remained relatively flat against most of its major rivals before the Chancellors Autumn Statement is delivered today at midday, coupled with the OBRs (Office for Budget Responsibility) Economic and Fiscal Forecasts report. The market participants expect for the Chancellor to announce a number of policy measures aimed at boosting growth, but to remain in line with its fiscal austerity plans. Office for Budget Responsibility report, scheduled just after the Chancellor’s addressing to the parliament will most probably show that the government is meeting its fiscal targets, however the final realization of balance target will be met only by 2016-17, two years later than projected in March. Overnight, Nationwide house report showed that house prices rose slightly in November (0.4%), marking it the third successive month of increasing prices. However, Nationwide said that the resilience in prices is mostly due to the lack of supply on the market as demand remained subdued and the factors underpinning demand had deteriorated further. Sterling came under pressure yesterday after OECD has cut its UK growth forecasts significantly and now expects the British economy to slide back into recession. In the same note Bank of England Governor Mervyn King said the Britain is being affected by euro-area crisis, and authorities must be ready to act if it continues to escalate.

The euro remained higher against the dollar before European finance ministers meet in Brussels today to discuss the ongoing debt crisis.  The European financial chefs will debate the details on how the EFSF (European Financial Stability Facility) will boost its impact by insuring sovereign debt with guaranties. Separately, the Italian Treasury is scheduled to sell up to 8 billion euro of debt today, and some analyst are predicting that the government may be forced to pay more than 7% in today’s debt auction. OECD (Organization for Economic Cooperation and Development) said yesterday that Italian economy may contract next year as debt crisis damps confidence and complicates financing. The OECD forecasts for Italy to expand by 0.7% this year before shrinking by 0.5% in 2012 and called for Italian government to implement the structural reforms and balance its budget deficit. Expect for the single region currency to remain volatile as region’s debt crisis in weighing on the currency.  

 

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