U.K. Budget Deficit Remains At Concerning Levels

Fundamental Headlines

• Fear of Double Dip in Housing – Wall Street Journal
• OECD Sees Stronger Recovery – Wall Street Journal
• Range-bound dollar cools risk rally on global markets - Financial Times
• Stocks Fall, Yen Climbs on Concern Rally Outpaced Economic Growth Outlook – Bloomberg
• Bernanke's Clout in House Will Be Tested as Panel Votes on Audit Measures -Bloomberg

USD/CHF – The Swiss October trade balance surplus rose to 2.46 billion from 1.91 billion as exports rose 0.1%. Demand from abroad rebounded from -0.9% the month prior as the global economy recovery’s from the worst recession since WWII. However, a strong Swiss Franc continues to make Swiss products less competitive in the market place. The Swiss National Bank continues to look to limit the local currency’s appreciation by intervening into currency markets. However, the OECD raised their outlook for growth and recommended that policy makers look to raise rates by the end of 2009.

GBP/USD – U.K. retail sales rose 0.4% in October as consumer’s continue to open their wallets as the recession comes to an end. Domestic spending increased for a consecutive month led by a 2.1% rise in apparel sales. The U.K. is expected to return to growth in the second quarter aided by stimulus efforts. Policy makers added £25 billion to the asset purchase program bring the total to date to £200 billion. Indeed, we saw public spending for October at £11.4 billion which was the most for the month on record. The budget deficit fell from £14.9 billion last month but exceeded expectations of £7.0 billion. The central bank faces difficult decisions over future monetary policy as the country’s AAA ratings is in jeopardy but downside risk remain for the economy. To discuss this and other topics visit the GBP/USD Forum.