Coalition not split over Capital Gains Tax

Headlines today are circulating around the planned increases in non-business capital gains tax. It had been suggested that the coalition was split over the decision but business secretary Vincent Cable denies these reports. Increases could see planned second home sales increase to anywhere between 40–50% as second home owners try to shed their investments.

Pound Sterling – UK Markets

As UK stocks jumped and US equity futures advanced, the Pound jumped to its highest levels versus the Euro in almost a year. A reduction in the requirement for the Dollar seems to be the most likely cause for this. News coming out of China seems to have contributed to its relative strength against the Dollar. Whilst March/April CBI data reported steady sales, the uncertainty surrounding the election have causes a severe drop in April/May figures. The GBP/USD rate as of GMT 1240 was 1.45070 whilst the GBP/EUR rate stood at 1.18270.

US Dollar – US Markets

It is predicted that the Dollar index will fall to a 3 week low as it forms a “double top” on the back of technical analysis reports coming out of Citigroup Inc. The Dollar’s performance against a basket of six trading currencies yesterday came very close to 14 month highs which the Citigroup described as being poor. First quarter GDP figures have been reviewed and partial data points towards a modest upwards revision of earlier predictions. Q1 GDP figures now stand at 3.5%. The USD/EUR rate as of GMT 1240 was 0.81510.

Euro – European Markets

On the back of the turmoil in Greece, the Spanish government have backed a £15bn austerity package which aims to cut the countries deficit. This action includes 5% wage cuts for civil servants and slashes previously proposed investment plans. The aim of such cuts is to prevent the spread of the debt crisis that has struck Greece. However, good news for the Euro finally saw the single currency claw back some ground on the Dollar. This came amidst reports that China’s foreign exchange regulator denied all reports speculating that they were looking to review all Euro-denominated assets. Further strengthening was seen after it was revealed the Euro’s 14% drop this year was ‘excessive’. Furthermore, the Eurozone crisis which has seen the Euro fall has consequently increased sales of luxury goods. London based Burberry Group was just one of the many companies that reported increases in annual profits off the back of the crisis.

Other Currencies – Highlights

The Mexican Peso, which has been plummeting over the past month is suggested to have been caused by a strengthening US economy, RBS Securities inc. have stated. This fall may only be temporary as an increase in demand for their exports may strengthen the local economy. They predict that the Peso will see a 19% increase against the Dollar by year end but this is in fact the most optimistic of forecasts.