Have we weathered the storm?

With floods and droughts affecting many food and textile crops in the Middle East and Asia, the cost of living is set to increase. Although man cannot live from stats and figures, positive date from each of the major markets is giving a glimmer of hope that a tentative economic recovery is underway. At 10am GMT, Sterling was trading at 1.5537 against the US Dollar and 1.1938 against the Euro.

Pound Sterling – UK Markets

In a pleasant surprise, UK employment data was released as being stronger than predicted, up by 286,000 in the 3 months to July. This was the fastest gain in recent history and we saw some Sterling strength on the back of this news. One less positive aspect of the data was a 14,000 fall in the number of job vacancies, with the largest reduction occurring in the education sector. The UK has a tendency to import many products and as such is very sensitive to movements in the cost of Asian exports, especially clothing and textiles. A growing number of UK retailers have indicated that due to an increase in the cost of cotton (as a result of bad growing conditions) clothing price increases could be up to 10% next year and coupled with a VAT rise in January the cost of living is likely to increase. Although you might have to pay more for your clothes, there is some small good news for those with a mortgage; housing market analysts and economists are predicting that the base interest rate will remain low well into 2011. Following a speech by the Bank of England Governor yesterday this figure could be maintained as far as into the fourth quarter of 2011 but a lot will depend on how they can manage the over inflated rate of inflation.

US Dollar – US Markets

More evidence that the US economy is weak but probably not contracting came out yesterday. US industrial production was up 0.2% in August with a 5% pull-back in auto production and a 1.5% fall in utility output being offset by a 0.5% rise in ex-auto factory output. US import prices were up 0.6% in August with Oil being the main driver for this. Those with Dollars to exchange would do well to speak with their broker today.

Euro – European Markets

The Eurozone saw some stability yesterday with Euro CPI steady at 1.0% in August and employment was unchanged in Q2, as it was in Q1. This flat jobs picture follows six quarters of decline from mid 2008 and although it can’t be said to be painting a good picture, it’s certainly not a bad one.

Other Currencies – Highlights

The price of gold hit a record high on Tuesday, with analysts giving a number of reasons for its rise. The price of the actual metal rose to $1,274.75 an ounce. India's central bank has raised interest rates by more than expected as it continues to battle high inflation. The Reserve Bank of India increased its rate from 5.75% to 6%. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000