Over generous, foolish or long term economic stability. Whatever your view, Labour’s parting decision to bear a fractional brunt of any bailout necessary within the EU will cost the UK in the coming months. Currently, the single currency sits in a very precarious situation with Portugal requiring a bailout and many suggesting that the plague may spread through Spain as well. Not that the rates reflect this…
Pound Sterling – UK Markets
As predicted, Sterling saw further positive gains against the US Dollar as reports proved correct that the Producer Price Index rose at a faster pace than last month. However, whilst the ECB decided to raise interest rates, BoE decision makers held rates firm at 0.5% as expected even though concerns continue to grow over the excessive rates of inflation.
On the flip side, UK house prices continued to fall as banks reported weakening demand in the sector. Average house prices in England and Wales declined by 0.1% from February whilst mortgage approvals actually gained by 4.3% last month to the highest levels since May last year. Mixed reviews across the board are set to confuse us all over the coming weeks.
US Dollar – US Markets
Conventional theory suggests that more often than not, should the Euro strengthen, the US Dollar should fall in sequence. With this in mind it has come at no surprise that both the Euro and Sterling have seen further gains against the dwindling currency.
Currently, everyone has their own view on the state of the US Dollar and with other nations appearing to gain momentum in the global economic recovery; your broker may be able to shed some light on the current state of the world’s power nation.
Euro – European Markets
Following the ECB’s decision to raise interest rates by a quarter of a percent up to 1.25 % yesterday, it appeared as though the currency markets had already factored in any possible movements. On the back of this, the ripples of the decision later seeped into the German export markets which climbed a whopping 2.7% in February causing the Euro to strengthen further against both the Dollar and Sterling.
However, with most of us feeling that Euro currently represents a very false representation of the true situation currently facing the continent, ECB President Jean Claude Trichet placed stark warning over the true picture. He placed great emphasis on the debt issues facing several nations and the overall bleeding effect that may eventually occur should Spain follow Portugal by going cap-in-hand to the EU. Spain strongly refuse that they will do so but most feel that this may be just be denial.
Other Currencies – Highlights
Few of our clients may not actually be aware that we are one of the only Foreign Exchange Brokerages in the UK to offer the Brazilian Real as a tradable currency. As an emerging currency, the BRL has seen further gains this week as Finance Minister, Guido Mantega announced long term currency appreciation is a given. The real gained up to 2% against the US Dollar on the back of this to its strongest intraday level since last August.
Following the recent disaster in Japan, both the Australian and New Zealand Dollar continued their recovery as traders added to thoughts that a further interest rate rise is expected over the next 12 months.
BoE less likely to increase interest rates in May
UK’s CPI figure in spotlight, as the Pound value drops
Sterling slumps after lower than expected CPI results