Supercuts!




Chancellor George Osborne and Chief Secretary to the Treasury Danny Alexander will today announce plans for a massive public consultation that will see ministers visit town halls across the country to sell the austerity measures to way voters. Yesterday, PM David Cameron warned the cuts would affect "our whole way of life" as he prepared the public for a 22 June emergency budget that will bring tax hikes and a reduction in spending. Previously unpublished Treasury figures showed interest payments would surge to £70bn a year if overall reductions needed to tackle the nation’s record budget deficit weren’t initiated. On a positive note, UK retails sales rose 0.8% in May as consumers bought clothing and equipment to enjoy the "warmer weather" and the World Cup.


The Euro has fallen 17 percent against the dollar this year as the debt crisis exposed cracks in the monetary union and prompted budget deficit cuts across Europe that may hinder the economic rebound. The Euro slid as low as 1.1877 against the dollar yesterday, the weakest since 2006, before recovering slightly above 1.19. European Union governments vowed to police national budgets at an early stage and introduce a wider range of sanctions on excessive deficits to prevent a repeat of the Greece debt crisis that has undermined the Euro.


Fed Chairman Bernanke commented yesterday that he expects a continued recovery in the US. However, he also added that the slow recovery of the labour market remains a concern, and that the banking system is still not completely healthy. In respect of the EU debt crisis, he is watching it "closely" and that he expects the European leadership to keep the currency union together. These comments provided short term support for the Euro.


Focus this week will be on the BoE and ECB rate announcements on Thursday. No rate changes are expected but a lively press conference is expected from ECB president Trichet.