Sterling slides as trade deficit widens
The Pound has depreciated against other major currencies in the past twenty-four hours. As the new coalition Government Ministers take their seats around the cabinet table, news arrives that the gap between UK imports and exports has unexpectedly risen bringing the mounting budget deficit to the fore.
Pound Sterling – UK Markets
David Cameron’s newly formed Cabinet has met for their first cabinet meeting. Chancellor George Osborne has made it clear that the Liberal-Conservative cabinet will have to make cutting the deficit an absolute priority and that there may be some difficult times ahead. The new Cabinet has some disappointing figures to deal with straight away.
The expectation that the decline in the Pound would drive up UK exports has not been realised as yesterday the Office for National Statistics released new trade deficit figures. The value of imports exceeded exports by £3.7 billion (up from £2.2 billion in February). Events in the Eurozone may have negatively affected UK based exporters.
The Pound fell by nearly two cents against the Dollar (the lowest in a year), a cent against the Euro and made losses against other currencies such as the Japanese Yen. It has begun to rise again against the Euro so far this morning.
US Dollar – US Markets
The U.S. Dollar continued its strong performance against the major currencies on Thursday. The April import price index rose.
There are now eight banks due to face investigation following the initial accusations against Goldman Sachs. It is alleged that the relationship between the banks and credit rating agencies were manipulated to give better ratings for high-risk securities and that poor US mortgage debt was a key contributor to the global economic crisis.
Euro – European Markets
The Euro is continuing four weeks of losses against the Dollar. It has fallen to its weakest level in fourteen months against the Dollar amid speculation that debt-cutting measures by European nations will undermine economic growth.
The Euro’s ongoing weakness is causing continued speculation about how it will fare in the long term. Concerns have come forward that the Euro itself may be in severe danger and could either disintegrate or suffer certain nations abandoning the currency. As yet these are only initial speculations coming forward from individuals such as the former Federal Reserve Chairman.
Other Currencies – Highlights
China plans to expand settlements of international trade using the Yuan. This is to meet rising demand from Chinese companies who suffer from the high levels of volatility in other currencies affecting their international trade.
The Japanese Yen has appreciated against US Dollar, the Euro and Sterling.
The British embassy in Bangkok has temporarily closed following an upsurge of violence in the Thai capital. The Baht is experiencing great volatility and is at its lowest level for a year against the Pound.