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Flamenco will never leave the shadow of Spain. This song-dance-and-guitar art is a significant part of the Spanish culture. With its uniqueness, color, and passion, Flamenco is now a loved ‘music and dance’ around the world. No wonder why many people of different cultures are interested to learn how this lovely dance started and what phases it underwent over the years.

The Birth of Flamenco

Even now, the origin of Flamenco is still vague. But there are some suggestions as to where it came from: the Flamenco we know today has originated in the southern part of Spain, most especially in the Seville province. However, Andalusia is pointed out to be its real birthplace.
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Yesterdays UK public sector net borrowing came in at £11.4 billion- much higher than forecast. Going forward the growing concern on the debt levels in the UK will be a huge issue; to a degree the recent sterling fragility is due to the cloud of debt hanging over the UK. Sterling fell on the news and continues to come under pressure in the markets. The OECD did not help the pound by downgrading its economic forecast for Britain and raising the forecast for pretty much everyone else. As of writing the pound is falling against the USD, EUR and JPY.

Overnight the Nikkei has fallen sharply and this has added to weakening demand for the higher yielding/riskier assets. We have seen strength naturally flow back into the USD and the JPY and the commodity currencies are on the back foot. Japan left their interest rates unchanged as expected and upwardly revised their economic outlook- this has helped the keep the Yen firm across the markets. The EUR/USD trading range of 1.4750-1.5050 remains intact largely supported by Asian central banks.

Yesterday the Euro current account showed a deficit of €5.4 billion- this was concerning as it identified a surge in imports and slumping exports; this could bring the strength of the euro back to the fore as a red flag for the ECB.  If this issue is raised it could start to turn the tide on recent euro strength…

Sterling has softened a touch this morning following ugly UK October Public Sector Net Borrowing data. The number has come in at £11.419 billion versus the forecast of £7.0 billion; this is the highest reading on record. For the UK we have also had retail sales data which posted a + 0.4% against the expectation of +0.5%. Although retail sales data was healthy enough, the fact that it was slightly below expectation has undermined sterling. The Public finance data certainly  undermined sterling and reaffirms the dire conditions in this regard. The pound has also come under a little pressure this morning with the papers touting that business leaders are not warming to the look of the new financial services legislation. With the recent rally on GBP/USD the snippets of negatives mentioned above has encouraged selling pressure on sterling so far today.
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The Bank of England were split three ways on the November QE vote. 7 backed the £25 billion increase, David Miles wanted a £40 billion increase and Spencer Dale wanted no change. This has undermined sterling which immediately dropped over half a cent against the USD before re-gathering it’s composure. The split has highlighted the indecision on future policy and this is hardly surprising given the implications on monetary policy decisions within the current economic climate.

Yesterday we saw the UK inflation numbers come in higher than expected, but not that much higher. It is interesting to note just how much higher the numbers currently are than the BoE was predicting in their inflation reports from earlier in the year. This gave Sterling a strong boost all round, on expectations that with inflation “surging” rates might have to be raised sooner rather than later. I think that this is an unlikely scenario and that Base Rates will remain at these low levels until the 3rd quarter next year, possibly longer.
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Following US treasury secretary Tim Geithner’s backing of a stronger US dollar, Ben Bernanke also opined on a stronger US dollar….what did the markets do? They sold the USD further. After an initial bounce in the USD’s fortunes the market quickly turned pessimistic on how a strong US dollar can be sustained with the Fed’s policy on maintaining low interest rates for a prolonged period. Sterling has been a major beneficiary of the recent USD weakness and 1.70 is now a serious target.

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Disappointing data on Friday coupled with little headway in the APEC conference has served to undermine the USD as we start the week. EUR/USD is approaching the 1.50 level; GBP/USD made a short breach of 1.67 and USD/JPY remains pegged under 90. On Friday data showed a higher deficit with a surge in imports and the Michigan University consumer sentiment came in weaker than expected. What has weakened the US dollar is continued talk of the negative impact of a weak USD; Liu Mingkang, the Chairman of the Chinese Banking Regulatory Commission said that the combination of a weak US Dollar and ultra low interest rates had encouraged huge volumes of carry trades that were having a “massive impact on global asset prices”. A weaker USD on the one hand will help the US recovery and prolonged low interest rates will have the same effect; the issue here is that the knock on effects of this scenario hit global economies that rely on a stable and strong USD.
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