Bank of England Governor To Answer Severe Questioning

Mervyn King, the Bank of England Governor, is speaking to the Trade Unions Congress today, being only the second to do so in that position in over a century. Questions to King from the six million member umbrella trade union organisation are likely to be tough and focus on bankers’ bonuses, taxation and the influence of cuts on unemployment. The discussion is likely to bring lack of confidence in current UK economic policy to the fore. Sterling was trading at 1.5488 against the US Dollar and 1.1945 against the Euro at 9.45am this morning.

Pound Sterling – UK Markets

The Pound has gained on the US Dollar over the past twenty four hours. This is despite yesterday’s gloomy housing data and the news that UK inflation data remained at 3.1 percent – well above the Bank of England’s target rate of 2 percent. This morning’s UK data has revealed that the ILO unemployment rate has remained the same in August but jobless claims have increased to 4.5 percent of the workforce. Bank of England Governor, Mervyn King, is to face some rigorous questioning from the Trade Unions Congress today. This will make him only the second holder of the post to speak to the union umbrella’s organization in 142 years, with the last being in 1998. Questions for King, who has been an outspoken advocate of Cameron’s budget cutting policies, are likely to focus on the tax gap, bankers’ bonuses and the cuts which have led to job losses. The TUC has more than six million members. The UK clothing retailer, Next, has spoken out following Debenhams earlier this week to warn that higher cotton prices, public spending cuts and the weak Pound may cause an increase in prices and a drop in retail sales into 2011 – however they did not anticipate a double dip recession.

US Dollar – US Markets

The US Dollar has continued to fall against most other major currencies. Retail sales for August climbed for a second consecutive month by 0.4 percent beating the expected rise of 0.3 percent. Eight of thirteen retails sales categories showed gains last month led by grocery stores, department stores and service stations. The Dollar has lost its recent strength as a safe haven as investors continue to opt for riskier currencies as the serious threat of a double dip recession seems less likely with more positive data releases.

Euro – European Markets

The Euro has gained on the US Dollar following the upwards revision of Eurozone growth forecasts earlier this week. European data this morning has revealed that the Consumer Price Index, which measures the changes in prices of goods and services has risen 0.2 percent in August coming in as forecast. Employment change for the EU has come in for the second quarter as unchanged at 0 percent.

Other Currencies – Highlights

Japan has intervened in the currency market for the first time since 2004 to curb the strengthening Yen which reached its highest levels against the US Dollar in fifteen years. Japan has sold Yen following pressure on Prime Minister Naoto Kan by business leaders to intervene and weaken the currency in order to protect the export market which is crucial to Japan’s growth. Some economists have said that this won’t be sufficient to prevent the currency from rising long term as Japan cannot do this alone without working alongside other nations to take action. There are forecasts that the New Zealand Dollar may fall to a five month low against the Australian Dollar with the expectation that The Reserve Bank of New Zealand will leave its benchmark interest rate at 3 percent. This follows the recent earthquake which is expected to cut 0.4 percent off growth in the third quarter and cost an estimated 2.9 billion US Dollars. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.