Daily Forex Brief 6th july

Daily Forex Brief London: Wednesday 6th July 2011

Now Japan may run out of money It appears that the sovereign debt crisis disease is spreading. Europe is still very much in intensive care despite last week's vote by the Greek Parliament to accept strict fiscal medicine. In the United States, policy sclerosis in Washington on the debt ceiling and fiscal policy issues shows little signs of loosening with now just four weeks until the drop-dead date for reaching the debt limit and a potentially disastrous default. And now, believe it or not, we have Japan also succumbing, with Finance Minister Noda pronouncing yesterday that the government might run out of money by October if the parliament fails to pass legislation allowing bond sales. In the current fiscal year, bond sales will account for around one-half of total spending. Prime Minister Kan has promised to resign, but not until a bill is passed allowing bond sales. The opposition meanwhile is holding up passage of the bill because it wants to enact spending cuts and fiscal discipline. Both investors and traders should continue to be troubled by these continued threats of sovereign default afflicting the three major currencies. It hardly breeds confidence in these currencies as a store of value.

Also in today's Daily Forex Brief: ECB ought to take note of slower growth Dollar profits from euro's ills, China rate hike rumour ECB softens stance on Greek debt RBA policy comfort dents the Aussie