UK Recession Was Deeper Than Feared

Revised statistics have reworked the picture of the UK recession suggesting that the economy shrank more than originally claimed. This information acted as a bleak backdrop to the flurry of UK data releases this morning. Anyone with a Sterling requirement would do well to speak with their broker asap.

Pound Sterling – UK Markets

UK markets suffered a wave of discouraging news reports and statistics yesterday. It has been revealed that Britain’s economy slumped 6.4 percent from the first quarter of 2008 to the last quarter of 2009 compared to the 6.2 percent initially suggested. In addition to this revised view of the depth of the recession, Standard and Poor’s announced they are keeping the UK’s credit rating on a negative outlook due to the amount of public debt (although maintaining the triple AAA rating for now). This announcement caused Sterling to drop yesterday afternoon. This morning has seen the release of the UK Consumer Price Index, House Price Index and Retail Price Index. The CPI has remained stable at 3.1% in June, house prices have risen slowly and some analysts are suggesting that they may only rise in line with inflation over the next 10 years. The retail price index declined to 5 percent in June from the previous 5.1 percent. Positive news however has emerged in the retail sector. The world cup, sunny weather and early summer sales encouraged retail sales to rise up 3.4 percent from last year. This mixed bag of news coupled with news from the Eurozone has seen a slight Sterling rise with the inter-bank rate sitting at 1.1990 against the Euro and 1.5062 against the Dollar at 10am this morning.

US Dollar – US Markets

The Dollar gained on most major currencies yesterday as troubles about stress tests on European banks and debt worries in Europe and the UK caused investors to turn to the Dollar. The US Dollar and Pound have moved back and forth overnight with the Dollar losing out to the Pound since the UK data releases this morning. The US May trade deficit figures are due today which are expected to show further large scale negative impact on US exports due to the recent strength of the Dollar making it hard to compete with other weaker currencies in the export market.

Euro – European Markets

The Euro has fallen against the Dollar as Portugal’s rating was slashed by Moody’s Investors Service from A1 to A2. The Euro has also suffered as the upcoming stress tests due next week on European banks have been the focus of much debate. Designed to demonstrate the resilience of the region’s banks, there are some claims that the tests may actually reveal vulnerabilities. On a positive note for the Euro, it has been revealed by the Greek Finance Ministry that Greece has managed to cut its budget deficit by 46 percent in the first six months of 2010. Harsh austerity measures and structural reforms have resulted in the target reduction of 39.5 percent being well over-achieved.

Other Currencies – Highlights

China is planning on reducing speculative property investment by curbing its cheap prices as it seeks to help stabilise economic growth. This policy may curb demand for commodities causing the Australian Dollar to fall as well as the Canadian currency. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.