By Alex Ellis

Sterling hit a four month low versus the Euro as QE concerns again weighed heavily on the pound, however we have since heard that the Anglo Irish bank is in a bad situation and to bail it out around €34 Billion is needed. This news has impacted the Euro and caused sterling to gain marginally in the short term. We may find that this strength is only short term as Ireland is a much smaller economy within the eurozone and other economies are in a much better financial position.

I think that the as the UK budget cuts are due to come into play on the 20th October and if these are considered to severe and damaging to the UK economy then we may well see further weakness for the pound.

The issue for the major economies in the world at present is that it is in their interest to keep exchange rates low as this aids exports and therefore helps to improve the strength of the economy. So we may find that some countries will attempt to aritifically lower exchange rates to encourage exports something we may have seen by members of the MPC announcing extensions to QE.