UK Growth Predictions To Be Downscaled Today

The new Office for Budget Responsibility in the UK is to release its first ever set of figures today. This is expected to severely downgrade the last Government’s predictions on economic growth and set the tone for the emergency budget due on the 22nd June.

Pound Sterling – UK Markets

The Pound is making gains on the US Dollar so far this morning prior to significant events and reports today. It is predicted that Alistair Darling’s forecast of 3 percent growth next year is to be significantly downscaled by the new Office for Budget Responsibility today. This has been set up to provide independent economic reviews and avoid any opportunity for politicians to manipulate statistics. Downward revisions may unsettle investors and could cause some movement in the Pound. In a forward of the Bank of England’s quarterly bulletin, it is stated that the recovery is likely to gain pace over the coming year. The new UK Government however has warned that cuts are likely to be the deepest since the 1980s and will last longer than any others since World War II. Nick Clegg is also due to speak today. Extracts of his speech suggest he will spend some time focusing on how events in the Eurozone will continue to negatively effect the UK as markets lose confidence in the ability of all European Governments to deal with their debt.

US Dollar – US Markets

The US Dollar gained on the Euro and the Yen on Friday following an announced increase in consumer confidence. However, so far on Monday morning it is losing out against the Euro and is still volatile against the Yen. New reports today have focused on spending cuts by both state and local Governments which may slow down growth in 2011. Also under scrutiny are the costs involved in stanching the losses of Fannie Mac and Freddie Mac, the US Mortgage companies that bought or guaranteed 75 percent of all US home loans last year. Both are firmly entrenched in the US and global financial systems and the expected bail out may reach as much as $1 Trillion as Congress negotiates a Wall Street overhaul.

Euro – European Markets

The Euro has risen against the US Dollar and the Yen this morning. This is linked to a tentative return of risk appetite to the markets as it is expected that more progress will be made on economic policy when EU leaders meet later this week. Finance ministers have indicated that the Euro’s slide against the Dollar may help recovery as this will provide a boost to exports. Statistics will be released regarding industrial production today expected to show some expansion for the eleventh month in a row.

Other Currencies – Highlights

The Yen has declined for a third day in a row against the Euro and the Dollar as well as fourteen other of its major counterparts. This is thought to be linked to the increase in US consumer confidence and other signs of global recovery meaning that the Yen is being less sought after as a safe-haven currency for investors.