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By Jonathan Watson

The euro has had a great week hitting 1.30 against the dollar and pinning sterling under 1.20.

The pound had a boost following the Emergency budget but it now appears that the budget is throwing up more questions. The key question is one of balance. Can the coalition government strike the right balance between ensuring a sustainable recovery whilst also implementing measures to reduce our budget deficit.

The UK’s credit rating has been at threat and the government had to act to show markets that UK PLC was working to solve it’s debt problems. These same measures however will likely lead to job losses and a reduction in growth which will affect the economy and it’s recovery. It is a Catch-22 situation and the government needs to get the balance right – no easy task.

It is worth noting that these problems could be around for sometime. The Emergency Budget contained numerous measures which we will not see the effects of until 2011 and beyond. For example VAT increases to 20% in 2011. Will the extra revenue this raises be outweighed by the potential decrease in revenue from reduced consumer spending? The answer is we just don’t know.

Investors and markets like certainty and at present there is not much emanating from the UK.

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By Jonathan Watson

We have seen recently how the recent gains made by Sterling have been eradicated. With over 4 euro cents and 2 dollar cents taken off in the last 9 days, sterling really needs a boost.

GDP data for the UK has been affirmed at 0.3% for Q1, confirming the weak emergence from recession. The markets are still very cautious, I think this will only continue in the short term as real details of the UK’s Emergency Budget slowly filter through.

The Ozzie dollar remains very strong against Sterling but could get stronger now the Mining Tax has been widely accepted, further boosting security in their Industrial sector. The Canadian dollar also remains quite strong following some positive unemployment figures last week.

If you have any currency transactions to make, please fill in the contact form and an experienced trader will advise you on how best to secure advantageous rates of currency exchange.

By Jonathan Watson

In times of uncertainty, investors may look to economic data to help them make decisions. The UK has two of it’s most important data releases due out in the coming days.

Thursday sees the release of the Bank of England (BoE) Interest Rate Decision. At the last decision we saw one member of the Monetary Policy Committee (MPC) vote in favour of an interest rate hike. This strengthened the value of Sterling even though no actual change to the rate occurred. This shows the weight such activity can give to currency movements. The very thought that interest rates ‘may’ be increased, arguably led to Sterling strength.

The GDP figues due Monday may carry even more weight. The original figures were due for release in June but were delayed for as yet unexplained reasons – only that of an ‘error’. This was the final revision to Q1 figures so it seems slightly ominous that such an error would occur now. The figures have only been late twice in their history and there is certainly some cause for concern at this delay so early in the new coalition governments office.

The prediction is more formally not for either of the figures to change. That is that interest rates will be held at 0.5% and the final revision on GDP growth will be 0.3% .

But whilst we expect no movement - any deviance from this would surely stimulate market activity, we might see the merest mention of deviance also cook up some uncertainty.

To make the most of market uncertainty and secure commercial and preferential rates of currency exchange, please fill in the contact form and one of the experienced traders that write on this blog will be happy to advise you how to make the most of your transfer.

By Alex Ellis

Sterling exchange rates have shown some resilience this morning as the losses that have been seen recently seem to have slowed. Sterling has been heavy hit recently following weaker than expected PMI data which showed that the future for the UK is still not certain. A senior member of the Bank of England commented last week that he expected the UK to enter into a double dipped recession, if this were to happen then the effect on exchange rates would be severe.

If you have an upcoming currency requirement then you may wish to conduct this before  we risk going any closer top a double dipped recession, otherwise the impact could make your transaction much more costly.

By Jonathan Watson

Sterling has weakened off this morning following some negative purchasing data from the UK services industry with a dip reflecting the weak nature of the UK recovery . Similair figures from the European Union held steady, giving rise to a weakening in the GBPEUR pairing. Virtually all of the Sterling gains made in the last two weeks against the Euro have been eradicated following reports that European banks were in slightly stronger positions than anticipated. The Euro had weakened as a result of question marks over their ability to pay back loans to the European Central Bank.

The US dollar continues to trade this lunchtime at a 6 week high. Poor data on jobs seriously affected the currency last week and some analysts see the US heading for a double dip recession. 125,000 jobs were lost in the US last month on the Non – Farms Payroll data. Retail sales account for 2/3 of economic activity so movements here do affect the strength of their economy. This situation is presenting some good opportunities for those with US dollar requirements. So whilst we could see gains should a double dip look likely, the anticipation of continued negative data in the UK makes current levels very attractive.

Sterling has still made gains against a host of currencies recently. Agaisnt the South African Rand, the Canadian dollar and the Thai Bhat we are seeing gains which may be eradiacted if more negative news comes out against Sterling.

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