Portugal continues to face pressure from EU officials to request an EU bailout.
The German economy expanded 3.4% in 2010 – the fastest rate in two decades.
The British BRC Retail Price index showed that prices rose 2.1% last month – compared to 2.0% the month before.
The UK trade deficit increased to £4.123 billion in November according to the latest Trade Sheet.
This morning the outlook remains bleak for Portugal and the euro. Finance ministers from across Europe and even the Director of Portugal’s Central Bank Teodora Cardosa are casting doubt on Portugal’s ability to remain solvent without an ECB bailout. Dutch minister Jan Kees Der Jager has said for instance that Portugal’s efforts so far to reduce its deficit have been insufficient.
The Portuguese Premier Jose Socrates meanwhile continues to deny that his country requires a bailout. He notes for instance that in 2010 Portugal met EU targets for 2010 to reduce its budget deficit by 7.3%. But so long as rumours continue to circulate it is likely that Portuguese bond yields will rise, making it harder for Portugal to find financing on the markets.
These reports continue to put pressure on the euro.
In related news, this morning fresh reports state that the German economy grew by 3.6% in 2010. This is the fastest pace of growth since German re-unification two decades ago, and almost reverses the 4.7% contraction in 2009. The increase comes off the back of increased exports: Germany is the world’s second largest exporter after China, and in 2010 exports grew 14.2%.
In the UK meanwhile the latest BRC Shop Price Index figures were released at midnight, and show that inflation increased 2.1% for retail goods compared to 2.0% last month. This could give the Monetary Policy Committee extra food for thought ahead of tomorrow’s interest rate decision.
In addition the British trade sheet (measuring the balance of imports and exports) showed an increased trade deficit of £4.123 billion for November, compared to £4.038 billion last month. This indicates that appetite for UK exports worsened during November (or Britain imported more than it exported) and could prompt a drop in sterling.
The EU industrial production figures for November are released today, indicating manufacturing activity inside the euro zone. In addition the US Import Price index numbers for November are released today too. This indicates the price of imported goods to the US, and the higher the rate the better for the US dollar – generally speaking.