Sterling Takes a Tumble

The long weekend in the UK sun has left many feeling positive and consumer spending figures fueled by the Royal Wedding celebrations and a likely boost from tourism are already being optimistically gestimated. Any positive figures will be gladly received after poor UK consumer spending figures were hit by the rising cost of living, coupled with nation wide pay freezes. In stark contrast to the Royal Nuptials, the notable news at the start of this week was the termination by US forces of Al Qaeda leader Bin Laden. The immediate effect was a lift in US equity futures, treasury yields, and the US dollar but this has now been unwound. To discuss how world events can effect your trade please contact your broker.

Pound Sterling – UK Markets

Contrasting data in the UK is leaving a few potholes in the road to economic recovery. Strong manufacturing figures are in contrast to constricted consumer spending. Sterling is currently down on both the Euro and the Dollar trading at 1.1160 and 1.65 accordingly at time of writing. Medium sized manufacturers saw orders grow at the fastest rate in 16 years in the three months prior to April according to the CBI with 23 percent experiencing an increase in export figures aided by a weaker pound. The positive manufacturing figures are weighing in against poor consumer spending and according to some economists; the average middle income house hold will be 800pounds worse off this year if a pay freeze and increased inflation are taken into account. With little sign of an impending interest rate rise, a large correction in exchange rates is unlikely in the short term so clients looking to sell Sterling should speak to their broker to protect themselves against adverse further volatility.

US Dollar – US Markets

The US recovery looks set to be boosted by its manufacturing sector after 21 consecutive months of growth which has been aided by a weak dollar. Although the manufacturing sector looks to be gaining strength, construction is following at a less consistent pace with February’s data being revised to show a decline of 2.4percent. Economic growth forecasts have been hindered by high energy prices which have weakened consumer spending causing it to fall to 2.7% from 4% in the previous quarter but the US Dollar is currently up against Sterling.

Euro – European Markets

The German economy has long been reported to be booming and Commerzbank; Germany’s second biggest lender has reported growth of 3.9percent. Whilst the trend for Germany is showing strong recovery, many of its Eurozone cousins are still well and truly left in the shade. European banks are facing concerns that the ongoing sovereign debt issues will face new turmoil in 2013 when many of the bonds issued to raise capital will come to maturity. Greece is attempting to negotiate another extension in its loans to avoid a full scale restructuring of its public debt after the expectation for a default has increased with the deficient currently standing at 10.4percent of GDP.

Other Currencies – Highlights

Canadian industrial product prices rose 0.9percent in March, led by a 5.7percent rise in raw materials as world commodity prices soared. The Cad is currently trading at 1.5671 against Sterling.