European Fundamentals Fail to Impress, Raising Bets For Rate Cut by the ECB, BoE, and SNB

Fundamental Headlines

• Auto Makers' Rescue Drive Stalls - Wall Street Journal
• Ballmer Kills Hopes for Bid, Pummeling Yahoo Shares - Wall Street Journal
• Iceland secures $5.1bn bail-out - Financial Times
• Record Options Trading Slows as Hedge Funds Fold, Prices Surge - Bloomberg
• GE Talking With Asia Sovereign Funds to Add Investors - Bloomberg

GBPUSD - Retail spending in the U.K. fell 0.1% in October following a 0.5% decline in the previous month, which was much stronger than the 0.9% fall projected by economists. The breakdown of the report showed that consumption of household goods plunged 3.4% from the previous month, followed by a 1.5% decline in clothing and footwear. Fading employment opportunities paired with falling home prices continues to take a toll on consumers, and conditions may only get worse over the coming months as credit conditions remain far from normal. Meanwhile, public-sector borrowing in the U.K. increased 1.4B in October, which was much higher than the 0.4B rise projected by economists, and was followed by a 4.9B decline in public finances. The data suggests that the budget deficit for the U.K. will continue to widen over the coming months as policymakers raise fiscal objectives to stem further downturns in the economy, and will be an ongoing concern for the Treasury as tax revenues continue to weaken in light of the credit crisis.

EURUSD - The German producer price index slipped to 7.8% from 8.3%, which crossed the wires slightly stronger than the 7.3% estimate projected by economists. The breakdown of the report showed that fuel prices fell to 3.3% from 11.4% in the prior month, while utility costs unexpectedly increased to 26.3% from 23.4%. Falling oil prices have certainly helped to alleviate price pressures throughout Europe, and will certainly allow the European Central Bank to ease policy further as growth fears intensify.

USDCHF - The trade surplus for Switzerland unexpectedly widened to 1.84B from a revised reading of 1.46B in September due to a 5.5% decline in imports. Meanwhile, exports fell 4.6% in October, which suggests that demands from the global economy may remain subdued well into the next year as the Euro-Zone, Switzerland’s biggest trading partner, slips into a recession. The Swiss National Bank stated that the economy may contract in 2009, which could lead policymakers to lower the benchmark interest rate further over the coming months in order to avoid a severe downturn in the economy.

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.