BP’s troubles to continue until August

Concern over the severity of the BP oil leak in the Gulf of Mexico continues to escalate. With BP share prices falling by 15% and reports suggesting that the leak could now continue until August, pressure is mounting on both BP and the US government to ‘fix’ the problem. General uncertainty appears to be playing havoc on more than just BP, as we have seen in the Currency markets following the long weekend.

Pound Sterling – UK Markets

UK consumer services companies have today revealed that first quarter sales figures have fallen dramatically from last year. Whilst 35% of those surveyed reported downward trends, a mere 14% suggested that sales had increased. Part of the new government’s plan will be to drive economic growth and pull Britain sharply out of its deepest recession on record. However, companies that were surveyed also suggested that the outlook over the next quarter is far from being positive so it may be a period of more uncertainty. As of GMT 09.55 the GBP was trading at USD 1.44780 and EUR 1.19040. For information on the rise and fall of the Euro, speak to your broker.

Euro – European Markets

The Euro has once again taken a slight tumble as concerns over spending cuts grew. In an effort to reduce budget deficits the banks may also inadvertently slow the region’s economic recovery. Furthermore, Italy has reported that consumer sentiment has taken a hit whilst unemployment has also increased to 8.9%, which is an increase of 0.1% from the previous month. Consumer sentiment on the other hand has fallen by 2.2%. This news does not bode well for the 16 nation currency as Italy is Europe’s fourth largest economy. Forecasts from the Bank of Tokyo also fear for the Euro, as predictions for the fourth quarter state that the Euro will fall to USD 1.16. This is a severe retreat on last month’s predictions of USD 1.22. Long term, the outlook is not good according to senior currency economists.

US Dollar – US Markets

Recent upward movement from the Dollar has caused a certain level of concern in Asian trading. Senior analysts suggest that a resistance level of JPY 90 may be achieved, should the 20 day moving average drop below JPY 91. Furthermore, the interest level that banks pay for 3 month Dollar loans has risen towards an 11 month high in Asia. This has stemmed from reports that investors are now holding onto the Dollar in an attempt to guard against a repeat of the 2008 credit crisis. The Dollar still remains strong however and at GMT 09.50 the USD/EUR stood at 0.82230.

Other Currencies – Highlights

The Canadian Dollar has strengthened after the economy has grown at its fastest pace in a decade over the 1st Quarter. This has placed pressure on the government to raise interest rates which is likely to occur tomorrow. Increases of around a quarter of a percentage point are likely to be seen and this will take lending rates to around 0.5%. Brazil’s Raeis fell for the second consecutive day on the back of news that inflation over the next twelve months will slow to 4.76%, rather than previous predicted outlooks of around 4.81%. Furthermore, interest rate futures fell for the first time in four days as these inflation forecasts were cut.