PureFX

In Brief

Business managers in the US are more confident about business conditions than any time since 1988.

Inflation in the euro zone increased 0.2% in January.

UK manufacturing PMI has increased sharply, indicating that UK managers in manufacturing are optimistic.

In Depth

US

There was some good economic data from the US on Monday. For instance, the Chicago PMI (Purchasing Manager’s Index) increased to its highest level since 1988, suggesting business conditions in the US are improving nicely. Furthermore, consumption expenditures (indicating how much US consumers are spending) increased 0.7% in December.

Conversely this sent the US dollar tumbling yesterday. Why you ask? Well since the onset of the credit crunch the US dollar gained significant value as investors look to a “safe haven”. Now as the US economy is showing signs of recovery investors are looking elsewhere.

EU

In the EMU meanwhile, there was the latest inflation figure yesterday, indicating that euro zone inflation increase 0.2% in January.

Ordinarily the ECB would increase interest rates to compensate for high inflation. However, the weak state of several EU nations (Ireland, Portugal, Greece) means the ECB could not raise interest rates without impacting their economies

This leads me nicely onto talk of restructuring the EFSF rescue fund. This is because the interest rates demanded from the fund are (arguably) too high, leaving countries like Greece, Portugal and Ireland unable to repay their debts. Surely this obviously defies the point of the rescue fund, which is to help these nations back onto their feet?

UK

In the UK, house prices fell 0.1% in January according to new data released by Nationwide. This indicates that demand on the UK property market remains modest. Compared to the same time in 2010 for instance, prices have fallen 1.1%.

Also, UK manufacturing PMI (Purchasing Manager’s Index) has increased sharply to 62.0. This indicates that business managers in the British manufacturing sector are more confident about conditions in the coming months.

CA

Finally, in Canada GDP for the fourth quarter increased 0.4%, according to figures released yesterday. This is against expectations of a 0.2% increase, and suggests that the Canadian economy is also gaining steam.

Coming Up

It’s a busy day for data. The latest manufacturing PMI from the EMU is released later today, in addition to German unemployment figures. President of the European Central Bank Jean-Claude Trichet is also scheduled to make a speech later.

Finally, the latest manufacturing ISM (Institute of Supply Management) figures for the US are released, indicating conditions in US manufacturing.

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