Banks pass stress tests while UK manufacturing contracts

Kingsley Walker Currency BrokerWritten by:
Kingsley Walker
Currency Broker
T: 01442 892071
E: [email][email protected][/email]

Yesterday the Bank of England subjected a number of the biggest high street lenders to financial stress tests to determine, whether or not they would be able to survive a financial shock such as the events that hit the market in 2008. Out of the seven biggest lenders only two failed to meet the requirements, RBS and Standard Chartered were found not to have enough capital strength but have taken steps to rectify these issues.

Commenting on the results Mark Carney said, “The stress test results, taken together with banks capital plans, indicate the UK banking system would have the capacity to continue to lend to the real economy even under such a severe scenario.” Carney continued to reiterate that an interest rate increase is really not the Bank of England’s first weapon against financial stability risks and with inflation near zero they will want to continue keeping the rates at their current levels.

The first of the month brings with it a string of manufacturing PMI’s from across the board with results being released from the UK, US, Eurozone and China. There were no great shocks from the Eurozone with all meeting expectations or marginally improving on forecasts. However, results from the UK, US and China all showed contraction from previous readings. Chinese manufacturing slipped to the weakest level in three years posting a figure of 49.6 and over in the US the index fell to 48.6 against an expected 50.6. The US reading is the worst since June 2009 and the first time the index has fallen below 50 in three years. Following the 16 month highs seen last month, UK manufacturing missed expectations and the index dropped to 52.7 against the forecasted 53.7. Markit economist Rob Dobson said, “While the improvement in recent months is a welcome trend, scratching beneath the surface of the manufacturing numbers still exposes a number of weaknesses.” GBP/EUR started the day in the mid 1.42’s before dropping and finishing the day at 1.4190.

GBP/EUR

GBP/EUR Exchange rates

GBP/USD opened above 1.51 and finished the day in the mid 1.50 region as the mixed eco-stats from both economies did little to move the markets drastically.

GBP/USD

GBP/USD exchange rate

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Today’s announcements

From the UK we have construction PMI data and over in the Eurozone we have a string of minor eco-stats which should not move the markets. Over in the US we have speeches from FOMC member Williams and Lockhart which is also coupled with an address to the Economic Club by Fed Chair Janet Yellen. The major data release from the US will be non-farm employment change hoping to improve on the previous month.

 

 

 

Kingsley Walker
Currency Broker
T: 01442 892071
E: [email][email protected][/email]