The currency markets have moved sideways for most of trading yesterday. American durable goods orders were very disappointing coming in way below expected figures. This could easily be another sign that the biggest economy in the world is slowing down. The dollar did lose some value against the Euro but support was soon found.
A new report prevalent in European magazines highlights the risk severe cuts from the public purse pose to the wider European economy.
Strikes, social unrest and political upheaval could unsettle European financial markets from September but fears of a financial meltdown in the euro zone look to be overblown.
Europe has enjoyed a summer reprieve after the nervousness of May and June, when concerns about the political and economic health of Greece and Spain sent global markets reeling.
But from September, trade unions across Europe plan strikes and protests, Italy may face an early election, and Central and Eastern European nations are due for hard negotiations with the IMF, among the many issues ahead.
“The September and October editions of news magazines will almost certainly be covered in pictures of demonstrations, particularly in Spain and Greece,” said Western Europe analyst David Lea. “Things will certainly get more interesting.”
One day to watch will be Sept. 29, when trade unionists will take to the streets across most of the continent for a day of unified action against spending cuts. Media attention will focus on the scene of any violence which is most likely in either Greece, Spain or Italy. Riots in Greece last May saw three die in a burning bank. A repeat of this will not bode well for the Euro-zone as a whole.
Particularly serious riots in one country could increase its debt yields and insurance prices in the form of credit default swaps, one of the reasons the European unions have organized coordinated strikes for September is to prevent markets punishing any one particular country.
Some analysts also believe there is a particular risk of labour unrest in Belgium, which has yet to form a government two months after a general election, the laborious transfer of power compounding to weaken the European currency as a whole. President Nicolas Sarkozy is preparing France for spending cuts, as his currency with the voting millions drops the restless Parisians have started sharpening their guillotine and itching for a riot.
The Australian election still hangs in the balance but the weakness in their currency has been mitigated by mining giant BHP Biliton’s posting of massive profits almost 3 times higher than expected. These results go some way to buoy the Australian Dollar amongst the uncertainty in the political system.
Neither the incumbent prime minister, Julia Gillard, nor opposition leader Tony Abbott will be able to form a government without the support of independents as their parties failed to win a majority of 76 seats in the 150-seat house of representatives. The transfer of the reins of power will happen soon and their currency exchange rate could see a rally when the final blow is struck.