The Budget
Sterling strength against the Euro towards the tail end of last week and early this week appears to have been completely halted now following Alistair Darling’s ‘Budget’ for 2008 announced yesterday at 12:30.Notably, growth forecasts were lowered and there were indications that inflation looks set to continue to rise, outlining once again the bleak outlook for the UK economy. The Chancellor lowered the expected rate of GDP growth for 2008 to 1.75-2.25 from the 2.00-2.50 pct he had stated in the pre-budget report in October, which in turn had been revised down from 2.5-3.0. Unfortunately for those of you with an upcoming currency requirement this is likely to promote yet more uncertainty amongst outside investors, many of whom may now look to shift their funds elsewhere. To further contribute to the doubt surrounding the direction of the UK economy as a whole, Darling announced government debts are up to 80 billion from 58.5 billion the previous year, to be issued in the form of government bonds and gilts. This is likely to have a negative effect the strength of sterling simply because while there is doubt over the strength of an economy the currency has no logical reason to gain against other major currencies. Euro - $ Record Trading levels
Sterling strength against the Euro towards the tail end of last week and early this week appears to have been completely halted now following Alistair Darling’s ‘Budget’ for 2008 announced yesterday at 12:30.Notably, growth forecasts were lowered and there were indications that inflation looks set to continue to rise, outlining once again the bleak outlook for the UK economy. The Chancellor lowered the expected rate of GDP growth for 2008 to 1.75-2.25 from the 2.00-2.50 pct he had stated in the pre-budget report in October, which in turn had been revised down from 2.5-3.0. Unfortunately for those of you with an upcoming currency requirement this is likely to promote yet more uncertainty amongst outside investors, many of whom may now look to shift their funds elsewhere. To further contribute to the doubt surrounding the direction of the UK economy as a whole, Darling announced government debts are up to 80 billion from 58.5 billion the previous year, to be issued in the form of government bonds and gilts. This is likely to have a negative effect the strength of sterling simply because while there is doubt over the strength of an economy the currency has no logical reason to gain against other major currencies. Euro - $ Record Trading levels
Yesterday’s trading saw the Euro hit an all time high against the $, this is most likely off the back of speculation that The FED are likely to cut interest rates in the US by a further 70 basis points. For those of you with a $ purchase to make in the near future it would be advisable to stay in regular contact with your FCD account manager, as the current relationship between the US $ and GBP is extremely volatile. Also be aware that there is usually an indirect correlation between the strength of the $ and the strength of the Euro. As such this dollar weakness is widely expected to result in further Euro strength, hardly promising information for readers looking to transfer funds into the Euro zone anytime soon. To add weight to these fears, many analysts have predicted that the current situation in the US points to further economic problems in the UK . Further evidence to support recent claims that the Sterling-Euro exchange rate looks set to continue on its current downward trend.
Euro Zone Inflation
In less positive news for the Euro, inflation remained at 3.2% in february the highest level since the creation of the Euro in 1999. This has heightened calls for a rate cut in Europe, speculation suggests that something will have to be done to curb the spiralling economy. Although it is not yet clear if and when the cut might occur, and this simple sepculation may make now an opportune moment to trade. European Central Bank Governing Council Member Juergen Stark said that ‘growth in the euro zone is likely to slow to below 2% this year, but it is expected to remain relatively strong and continue.’ In addition, he said, ‘investment levels in the euro zone are still robust and consumption should pick up.’ This is far from suggestive of a central bank that is looking to lower interest rate levels and it is possible that the ECB may wait to see if the natural course for the economy might relieve the current inflationary pressures. If this is the case this is further damaging news to an already struggling GBP, considering global markets are anticipating at least 3 if not 4 more interest rate cuts in the UK over the course of the year. All things considered now may well be the time to secure your currency purchase, given that almost all current data points to further losses for Sterling. If you have a future currency requirement contact your FCD account manager to find out more about how to protect yourself against detrimental market fluctuations.
Elsewhere...
Also in the Budget, Alistair Darling announced a hike in alcohol duty. If this for you is the final straw and you are considering making that move abroad you’ve always dreamed of, to take advantage of the cheap wine and the better way of life, why not start your search at www.propertyline.co.uk.
Please contact djw@currencies.co.uk for more information or for help with any future trading requirements.
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