GBP and EURO

Ambrose Evans-Pritchard
7:40PM BST 30 Apr 2013
Eurozone risks Japan-style trap as deflation grinds closer-The eurozone is one shock away from a Japan-style deflation crisis after a key measure of prices fell to the lowest since the launch of the single currencyThe region’s core inflation rate – which strips out food and energy – fell to 1pc in March. This is far below expectations and leaves monetary union with a diminishing safety buffer.
“The eurozone is tracking the experience in Japan in mid-1990s. there is a very high risk of a slide into deflation,” said Lars Christensen, a monetary theorist at Danske Bank.
While eurozone core inflation was slightly lower in the aftermath of the Lehman crisis, the current figure is distorted by the one-off effects of VAT increases and levies linked to austerity. Adjusting for these taxes, the rate is now running at 0.4pc.
“The European Central Bank [ECB] should be concerned. If there is another severe shock, the eurozone faces a much bigger risk of falling into a deflationary trap,” said Julian Callow, global strategist at Barclays. “The danger is when deflation combines with high debt and deleveraging and becomes toxic. That raises the risk of a debt-deflation spiral. There are already signs of this in southern Europe.”
Mr Callow said nominal GDP – tracked by monetarists as the key indicator in sovereign debt crises – fell 1.8pc in Spain and 1.2pc in Italy last year. This means that the debt burden is rising fast on a contracting base.------











Wednesday, May 01, 2013

IN THIS MORNING'S TELEGRAPH

Philip Aldrick reports that George Osborne has asked the Financial Policy Committee to make short-term economic growth a priority over financial stability even if it means banks take bigger risks. GBPUSD Daily-3 yr RSI(8) suceesively lower 3 tops? MACD(2,65,1)--curve at same level of a previous much higher price top MTM(65,)-despite price much above 65 ma, MTM(65) still below 0.00 level Slow Sto(65,75)-K curve still below the D curve not in the trend to cut above the latter Wild Guess-GBPUSD  will become weaker??