As private and publically quoted businesses across Britian cut back and layoff staff it is edifying to see politicians desperately avoiding saying that the sainted public sector should be in any way inconvenienced.
Lily livered front bench spokesmen are so frightened of being accused of cutting back on the Holy Church of the NHS that they will not say what every intelligent person in this country knows must be said.
What is it about a public sector deficit of some £150 to 200 Billion a year that they do not understand? If you cannot afford it, cut it. Behave as though your electorate has just a modicum of common sense. Or are politicians so desperate to cling on to their own ‘little perks’ that they cannot bring themselves to act responsibly on the economic front in fear of being forced to accept their own medicine.
Another red letter day for our clients as the FTSE yet again battled ineffectively against the 4500 level.
Selling at or near to 4500 and buying on any weakness has proved to be very profitable for punters over the last month and a half and (to be honest) it is difficult to see this scenario changing in the short term. There is not quite enough good news to send us higher and while there is certainly bad news on the employment front the overall impression is that the economy is bumping along the bottom at the moment. Hardly a moment that would tempt sellers.
The rising trend line from the lows of March continues to hold (even first thing this morning) with this level now at around 4405 (as mentioned on Tuesday this support is rising at about 15 points a day). Many traders seem to be buying on this and selling at on an approach to 4500.
Sterling has recovered from the afternoon sell off yesterday and we are now pressuring the same highs from which we saw the temporary pull back. 1.6470. While cable did rally higher last week (all the way to 1.6660) one of the major resistance levels can be identified as being between 1.4470 and 1.4500. It was the break of this that caused the swift rally to the highs on the 3rd of the month. Here is a neat symmetry to the move in GBP/USD since September last year and in a perfect world this would now continue with a rally up to 1.75. The US (as mentioned many times over the last month or so) seems to be following a policy of a weak dollar and this is having a grim effect on the competitiveness of Euroland and the UK. With quantitive easing still the name of the game in the US (while the UK has limited resources to continue its own program) we may well discover that the Greenback is mid way on a long road lower.
With Oil and Gold linked inextricably to the value of the dollar we are also seeing a continued aid in the pressure towards higher prices in both, over and above the natural bias higher as hope over global growth improve. OPEC have continually stated their aim to get the price of Oil back to 75 bucks so it should not really come as much of a surprise as we approach that number. The continued increase in emerging market requirement for carbon energy is not going to go away and while the Western economies will probably continue on the slow and painful route of reduction in Oil dependency this is not likely to make enough of an impact to force the price permanently lower. We will, obviously, have moments of weak price performance but the long term outlook is probably for 75 to 100 bucks or even higher.
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