UK Business Confidence Downturn

In a week that will see the important Japanese consumer confidence figures released (tomorrow) along with a raft of similar figures from the UK and Germany this week, data just released indicates that UK business is pessimistic about future trends. The business trends optimism index has fallen from 93.1 (for August) to 91.3 for last month. This is the worst performance seen since the height of the global financial crisis. Business opinion suggests that UK growth will slow in Q1 2011 and could go into contraction in Q2 but with so many contradicting reports available this is by no means set in stone. Accountants BDO on behalf of the Centre for Economics and Business Research, suggest that further measures need to be taken to stimulate the economy, such as another round of quantitative easing however, this option was discarded at last weeks MPC meeting and Sterling has remained volatile but range bound over the past week.

Pound Sterling – UK Markets

Sterling lost ground against the Euro (-0.86%) and the Yen (-0.90%) last week, but gained against the Dollar (+0.21%). Friday’s close saw £1 buying €1.1427 and $1.5854. In addition to the gloomy business confidence index mentioned above, the RICS house price index balance for September will be released tomorrow. The index shows the strength of the UK housing market and is regarded as a barometer for the economy as a whole. It is anticipated that the data will show a decline, but has probably already been factored in to the value of Sterling so no drastic change is expected in Sterling on the back of these figures.

US Dollar – US Markets

A weak US payrolls report cemented expectations for another round of Fed stimulus sending the USD broadly lower on Friday. The US markets are closed today for the Columbus Day holiday – possibly affording the Dollar a welcome break. Unfortunately for the Americans, it will be traded elsewhere and has hit a fresh 15 year low against the Yen. US non-farm payrolls were announced on Friday and were down by 95,000 jobs in September. This is the fourth consecutive monthly decline and 83,000 of these jobs were due to state and local government positions being axed last month. Dollar buyers would do well to speak to their broker to capitalize on the recent gains.

Euro – European Markets

The Euro has been appreciating against all the other major currencies in recent weeks and was buoyed by the Japanese intervention to support the value of the Dollar. In the course of last week’s trading, it gained ground against Sterling (+0.86%) and the Dollar (+1.08%), but fell back slightly against the Yen (-0.04). At 10.15 this morning £€ was equal to 1.1435 and €$ 1.3940.

Other Currencies – Highlights

With the US Dollar hitting new 15 year lows against the Yen, analysts will be watching for signs that the Bank of Japan will intercede in the market again. The position of the Japanese government is that the high value of the Yen is a concern. Whilst they have sought international help to constrain its value, it appears that they are on their own for the time being. A high Yen will hit Japanese exports, making them less competitive and harming still further Japan’s stuttering recovery. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000