Well Andy Murray, give me a chance to eat my words! After comparing him to Sterling on currency charts (plucky but ultimately weak) he has sailed through to the final of the TMC to face Federer. Safe Swiss or volatile Brit? Let's hope Murray fares better than the blighted Pound!
Sterling is languishing at a very low point in currency markets at present. Having , plunged through the 1.20 barrier to reach an all time low against the Euro this week, the Pound is also trading at a 6 year low of 1.48 versus the US Dollar. This is down around 45% from November 2007. Sterling has been weighed down by the negativity attached to the UK economy at present. This week the Bank of England's Quarterly Inflation report showed unemployment has risen to 5.8% or 1.8 million in the UK, a 10 year high. BT announced 10 000 redundancies would be made and RBS announced a further 3000. UK home sales have dropped to the lowest level in 30 years and the Nationwide Building Society showed net lending had declined 70% in the last 6 months. The only positive piece of news is the low value of Sterling making British exports comparatively cheap, although given the current economic climate that is not particularly thrilling either!
Safe haven currencies have been flavour of the week as markets digested some significantly negative data. In the Eurozone, the economies of Germany and Spain contracted by 0.5% and 0.2% respectively, yet despite this the Euro has remained relatively strong. Eastern European currencies are still exhibiting large ranges and remain subject to the macro-economic forces which are driving markets at present. Zloty is trading at a weekly low of 4.45 this morning against Sterling, after a high of 4.66 just 2 days ago and the Czech Koruna has also sunk back to 30.09 after 31.26.
This week the OECD has predicted a 0.3% contraction in world growth with recovery beginning in Q1/2 2009. Global equities enjoyed a positive bounce when the Chinese government announced a 4 trillion Yuan rescue package, although these gains were largely erased along with Chinese growth prospects, which were revised from 12% to 9% for the year. G20 leaders, representing 85% of the global economy, are meeting in Washington this weekend to address pending recession and economic reform. Brown has already called for ‘fiscal stimulus' to kick-start consumer spending, likely to come in the form of further interest rate reductions, tax cuts and increased government expenditure. There is likely to be volatility following announcements from the G20 Conference, may be worth checking in with your dealer on Monday!
At present we are seeing the publication of third quarter statistics across the major economies which are illustrating the cumulative consequences of the credit crunch. GDP contraction, rising unemployment and redundancies are fuelling nervousness, which is in turn fuelling risk-aversion, preventing sustained bullish runs for major currencies. Much of the volatility we are seeing at present is markets being effectively trapped between reacting to the latest round of negative data, and anticipating the next one. Every comment, rumour and head scratch of leaders and financiers is subject to much scrutiny at the moment, as investors search for clues of which way the market will jump.
Christmas has come early for anyone looking to buy Sterling as the weak Pound is extremely good value at present. The prospect of further interest rate cuts is conspiring to keep the Pound weak in the short term. For those looking to sell currency, remember there is no magic formula, only good information and there are opportunities aplenty to make good trades. You just might not know it from looking at a daily rate. Take advantage of having a personal dealer, they monitor the markets so you don't have to.
Have a good weekend!