Home Truths for UK Economy
Home Truths for UK Economy
David Cameron has painted a harrowing picture of the true state of the UK’s debt which he predicts will escalate to £1.4 Trillion by 2015 without severe budget cuts now. Similar austerity measures are being planned across Europe.
Pound Sterling – UK Markets
The Pound continues to maintain its strong position against the Euro, trading at 1.2078 at 10.30am this morning.
David Cameron yesterday outlined the scale of British public debt and the ‘painful’ cuts necessary to curb the crisis.
The coalition has already outlined plans for £6.2 billion of cuts and is planning an emergency budget for the 22nd June as well as a spending review in the autumn. The Treasury will be asking the public for their views on where cuts should occur and a chamber will be created before which Ministers will have to justify their spending.
Chancellor George Osborne is expected to outline in Treasury questions at the House of Commons today how future spending decisions will be made and is likely to be inviting the public and organisations to become involved in decision-making.
May has proved to be a good month for consumer spending in the UK as the advent of the World Cup and nice weather have caused a surge in TV and clothes sales. Shops, however, remain nervous as budget cuts may bring further unemployment and decrease spending; the BRC warned that people were holding off buying big ticket items such as furniture until the outcome of the emergency budget this month.
US Dollar – US Markets
The US Dollar has gained against the Yen and has begun to gain on the Pound this morning.
Despite yesterday’s reports that US growth may be slowing and joblessness remains high, a new Bloomberg survey has revealed that the US has overtaken China and Brazil as the best market for investors in the year ahead. This is due to Obama’s stewardship of US finances as well as the European turmoil which has caused money to flow into the US Dollar as a safe haven currency.
Euro – European Markets
The Euro has picked up slightly but still remains subdued following Hungary’s comments that the Euro-zone crisis may be spreading to Eastern Europe.
European finance ministers have finalised the 440 billion Euro rescue fund designed to halt the spread of the Greek crisis.
Both Spain and Germany have announced new budget cuts. Spanish public sector workers are striking today over the announced 5% pay cuts and Germany yesterday announced 86 billion Euros of cuts by 2014.
European finance ministers have backed Estonia’s bid to become the 17th country to use the Euro, overriding the European Central Bank’s warning that Estonia may struggle to keep inflation under control.
Other Currencies – Highlights
The Japanese Yen has weakened against all of its major counterparts as demand increased for higher yielding currencies.
The New Zealand Dollar has climbed against the majority of its most traded counterparts on expectations that the central bank will be raising the official cash rate later this week.