SPREAD BET GURU
JOSHUA RAYMOND
MARKET STRATEGIST
[email protected]
Q. Dear Josh, with the EU and IMF finally agreeing a bailout for Greece, what is the focus now for the euro?
A. Make no mistake, the constant uncertainty within the Eurozone concerning the spiralling deficit problems of Greece and the other so-called Pigs nations has been a major factor in the euro’s depreciation to a new 10-month low against the US dollar and a 12-month low against the Japanese yen.
But as soon as the market started to anticipate that there would be a definitive and widely-agreed Greek aid package resulting from the EU summit, the euro immediately started to appreciate and regain some of the lost ground.
While the aid package is a significant step in the right direction, euro buyers are now likely to concentrate on whether the Greek austerity measures start to work and the debt temperature within the wider Eurozone community.
Last week, ratings agency Fitch downgraded its credit rating on Portugal to AA- and maintained a negative outlook. This re-emphasises that the sovereign debt problems within the Eurozone are not specifically isolated to Greece, with plenty of uncertainty remaining about Portugal and Spain.
Q. Dear Josh, the retail sector had a good performance last week. What is the current sentiment?
A. The earnings from both Next and Kingfisher were a bit of a surprise and both outperformed market expectations. Travel agent Thomas Cook also announced last week that they are selling more summer holidays than last year and at higher prices. Retail sales figures for February also came in much stronger than previously expected, with sales rising 2.1 per cent in February as opposed to the 0.7 per cent consensus prediction.
However, January’s sales were revised much lower because the atrocious weather in the UK at the start of the year prevented shoppers from getting to the high street. Therefore, consumers may well have postponed their January purchases and this could have boosted February’s figures.
But despite the positive results from retailers, most firms remain extremely cautious about their fortunes for the remainder of the year. There are likely to be spending cuts and higher taxes to come and the unemployment rate is still high at 7.8 per cent.
Therefore, it will be an ongoing challenge for retailers to convince the consumer to put their hands into their pockets throughout the course of the year.
Q. Dear Josh, what is the market consensus for the US non-farm payrolls that are scheduled to be published this Friday?
A. For the first time since December 2007, the market is expecting the United States economy to have actually created jobs.
February saw a loss of 36,000 jobs after blizzards and hazardous weather conditions suppressed the jobs market, taking the unemployment rate to 9.9 per cent.
But in March, early estimates have suggested that 187,000 jobs were created over the course of the month.