Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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From: Haim R. Branisteanu	8/2/2010 7:15:14 AM
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Up until now, the health of the US’s fiscal position hasn’t been a focus. The economy was recovering well earlier this year and more pressing concerns over Europe’s finances dominated news flow and market moves. However recent disappointing data from the US and an easing in immediate concerns around European banking sector contagion has refocused market attention. With the recovery showing signs of faltering, worries about the US’s bad fiscal position have been raised. Only last week, California‘s governor declared a state of emergency over the state's finances which now stand $19bn in deficit. What's more alarming is that California's debt to GDP ratio of around 25% isn't even the worst! Seven more states are in a worse fiscal position. Q2 GDP data also failed to provide much comfort, with growth having slowed from Q1. This week’s labour market report and ISMs will be key to get a clearer indication on the health of the US economy. A weak USD tone will continue until a tangible solution for the US' spiralling fiscal issue is seen or data noticeably soothes recovery worries. GBP/USD remains well placed for further near term upside. strategy.rbsm.com

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