Ireland Faces Severe Austerity
Ireland’s government has said today that spending will be cut by 20% and taxes will rise over the next 4 years as the ongoing bailout talks approach a conclusion. Welfare will be cut by â‚¬2.8 bn and income tax will rise to â‚¬1.9 billion. The plan is to rapidly narrow the budget deficit reigning in the debt to GDP ratio to 3%. This years deficit is 12% or 32% if you include the banks rescue package. These figures will undoubtedly weigh on the Euro in trade both this week and next. The fear is that this could be a taste of what is to come in other Eurozone areas.
Elsewhere the USD has strengthened as Americans increase spending for the 5th month in a row. They have also filed fewer unemployment claims, both of which suggest that the US economic situation is improving. Stocks have rallied and Treasuries declined as the economic releases today along with the increase in consumer confidence have helped to improve the outlook for the up coming holiday season.
It seems that a US recovery is gaining momentum and the S&P and the Dow are both reflecting this in afternoon trade today. Economic activity in the UK is at 0.8% in Q3 in the UK, the market didn’t really respond dramatically to this announcement as broader global concerns continue to dominate price action.
Attacks between South and North Korea remain in traders forethoughts, and have lead to considerable risk aversion. The GBPUSD pair may continue to come under pressure as growth concerns continue to concern traders.
Tomorrow sees a market holiday in the US which should contribute towards lower trading volumes and less volatility.
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