Rates To Go Up or Down?

Even the best analyst with all the information at their disposal will struggle to predict the market accurately however, most brokers prides themselves on a correct guestimation at which way the markets will turn. Therefore, with UK and Eurozone interest rates decisions being announced today we are watching the markets closely. Those of you with a forth coming transfer may want to contact your personal broker at some point today to get their opinions on the markets and discuss the best possible strategy for protecting your money going forward. Pound Sterling With the startling revelation that sterling has fallen against the euro on all but one day this month, it comes as no surprise that investors are once again expecting the BoE to hold interest rates at 0.5 percent later today. Mervyn King’s push to keep interest rates low has been backed up as his top official echoed these views pushing others who share this view to voice their opinions. Furthermore, after factory and services growth slowed along with reduced consumer spending it is feared that a rate rise could be delayed until next year. However, with BMW announcing plans to invest £500 million in UK car production over the next twelve months we could be seeing contributions to a huge boost in manufacturing and employment possibilities. Dollar It is suggested that the US trade deficit widened in April to a 10 month high as oil prices rose exponentially. And the bad news keeps coming as it is being touted that some are now questioning the role of the dollar as a safe-haven currency. US policies designed to keep borrowing rates low in an attempt to reduce the nation’s debt burden are the major cause of this recent announcement. Focus will turn to jobless claims today which are expected to have fallen from previous figures. If however, the US continues its recent run of poor data then the currency, which has tumbled over 9 percent in the last 12 months could fall further. Euro Speculation is already mounting that European Central Bank President Jean-Claude Trichet will state that a rate rise is likely next month. Whilst it is widely expected that rates will remain at 1.25 percent following the announcement today, future prospects for the euro are of greater importance. There is a feeling in the markets that news has already been factored into and should Trichet raise concerns about the debt issues facing the continent then we could see strong headwinds facing the euro. Again, with investors anticipating talks of a rate rise next month, should this not be the case the euro may drop steadily throughout the day. Watch this space… Other Currencies – Highlights Brazil have bucked the global trend by increasing interest rates yesterday for the fourth consecutive time yesterday. This has continued their attempts to reduce inflation back to the targeted level by 2012. On the flip side the Australian Dollar dropped after a report showed that employers added fewer jobs than economists forecast and the property market is potentially facing a “busting bubble” scenario. This has subsequently dampened reports that the Reserve Bank of Australia will raise interest rates in the short term.