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.

To find out more about securing preferential rates of exchange please use the contact us form and we will be in touch to discuss how we can help!