Sterling recovers...
Yesterday saw Sterling recover some of Monday’s losses after the release of key UK inflation data at 9.30am. UK CPI inflation reached the highest level in 9 months in February, due to a new method for calculating energy bills. The Office for National Statistics said CPI hit 2.5% in February, up from 2.2% in January. But without the change in methodology, the figure would have remained at 2.2%. This figure of 2.5% is above the government's target of 2% and highlights the challenge facing the Bank of England of tackling rising inflation as the economy slows.
"Although higher, this is no worse than markets expected," said Michael Saunders, economist at Citigroup. "Nevertheless, the Bank of England will remain worried about the effect of rate cuts with high and rising inflation," he said.
Many analysts expect the Bank of England, which reduced interest rates in February, to cut them 3 or 4 more times before the end of the year, as banking sector problems and the worldwide credit crisis continue to adversely effect the economy. The problem for the BoE though is that interest rate hikes are their primary weapon against rising inflation, and hence the uncertainty of how they can fit in more cuts becomes obvious.
Sterling was able to claw back some of its losses(1% against the Euro and 0.9% against the US Dollar) as “high-yield” searching investors returned to the Pound, amid the increased possibility of a “no change” or “rate hike” decision at the next meeting to be held on 8th April – although this outlook may change after the minutes of the meeting for this month’s decision, are released this morning at 9.30am.
During these uncertain and volatile times it is essential to speak with your account manager about upcoming data releases and how they can affect your currency purchase. We will also be able to explain the different contract options that are available to you, to protect you against possible adverse market movements.
The Fed fights back...
Following the devastating news that America’s fifth largest investment bank; Bear Stearn’s, was on the verge of going under, and the resultant take over by JP Morgan, the Federal Reserve yesterday slashed its interest rate by a further 0.75%, to try and aid its struggling economy.
This brought the total of cuts since mid September to 3%, or which a staggering 2% have been since the turn of the year. This move was in addition to the recent unveiling of steps not used since the Great Depression(cash auctions and direct loans), to ensure financial institutions have access to liquid funds.
The central bank is pulling out all of the stops to provide liquidity to financial markets and to hold up an economy many analysts now believe is in recession.
If you have a potential Dollar requirement, then now is a time to keep a very close eye on the market as volatility can provide spikes in the rate that might not ordinarily be available. Why not contact your account manager and discuss a Limit order – a means of potentially taking advantage of unforeseen spikes in the market.
And finally...
A report yesterday said that UK taxpayers needlessly gave £322 million to the taxman in 2007. This figure was a result of a failure to claim back overpayments in income tax.
If you think you may have overpaid then you can fill in an R85 form to try and reclaim your funds.
If you have any joy or if you would simply like to get away from a government content to keep your hard earned money, why not try our overseas property portal www.propertyline.co.uk and see if you can find that dream escape abroad.
For further information or any assistance with upcoming currency purchases please contact djw@currencies.co.uk
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