Pound Holding Up As Bankruptcy Strikes Again

Debt-ridden UK company Connaught are likely to enter formal administration today. The company warned against Government budget cuts at the time of their announcement now bringing the effect of austerity measures to the fore in the UK with many jobs set to be lost. Sterling has so far remained unscathed with uncertainty over the situation in Europe dominating markets. Sterling was trading at the mid-market rate of 1.5426 against the US Dollar and 1.2173 against the Euro at 10am this morning.

Pound Sterling – UK Markets

The Pound has strengthened against the US Dollar and Euro over the past twenty four hours. Halifax has given the view that house prices have stabilised in their new report. The report suggests that prices have risen by 0.2 percent in August which is still 16 percent lower than the August 2007 peak but concurs that the market is ‘broadly stable’. This morning has seen economic data releases in the industrial production and manufacturing sectors. Manufacturing data came in as expected and industrial production just slightly lower than forecast. In other UK news, the state of the economy is in the spotlight with property giant Connaught expected to formally enter administration later today. The bankruptcy of the company that specialises in social housing will be the largest company failure since Woolworths in 2008. The firm failed to secure funding for £220 million of debt. Unemployment is also being scrutinised following a survey by the Recruitment and Employment Confederation indicating that both permanent and temporary placements rose at the weakest rate since October 2009. Fears are rising that the private sector won’t be able to add jobs quick enough to soak up the losses of the public sector as further cuts are implemented.

US Dollar – US Markets

The US Dollar gained significantly on the Euro yesterday as markets returned to their safe-haven tendencies following the uncertainty surrounding European banks. Negative news may be on the way however with the Yen advancing to a fifteen year high against the Dollar. The Federal Reserve’s beige book interviews economists and key businesses across twelve regions to gain a picture of the economic situation. There is speculation that the results of this will add to sentiments that the US recovery is significantly stalling. Some economists are also suggesting that the jobless rate is going to reach 10 percent in coming months. Today also sees the mortgage application data release which may provide more evidence of a slowing economy.

Euro – European Markets

The Euro has lost out to other major currencies over the uncertainty of the Eurozone recovery and health of banks. The Wall Street Journal also added fuel to the fire by saying that some European banks did not provide a full enough account of the government-debt holding during the recent stress tests. There has also been an unexpected decline in factory orders from Germany, the economy charged with the responsibility of leading the Eurozone through recovery. Germany’s trade surplus however is higher than expected.

Other Currencies – Highlights

The Canadian Dollar has fallen the most in two weeks against the US Dollar as stocks and crude oil prices have dropped. In Australia, Prime Minister Julia Gillard and her Labor party have taken control following the inconclusive election results in August which may bring more certainty back to currency investors looking at the Australian Dollar. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000