Like a Lead Balloon

Perhaps unsurprisingly UK interest rates were left on hold yesterday at the record low of 0.5percent. Across the Channel, central Bank President Jean-Claude Trichet also froze rates making the announcement with a loaded statement which shock the market. Throughout yesterday we saw the Euro drop 2percent against Sterling. Speak to your broker today if you are planning on transferring more than three thousand pounds (or the equivalent in another currency) we will be able to save you some money.

Pound Sterling – UK Markets

UK interest rates were kept at the record low of 0.5% by the Bank of England's Monetary Policy Committee yesterday despite inflation being twice the banks target at 4 percent. The BOE had a difficult set of scales to balance but opted to maintain the cost of borrowing in an effort to prevent the country from slipping back into recession rather than raising rates in an effort to control inflation. What may have helped tip the scales is the pace of growth in the UK service sector which slowed last month following a huge boost in March’s figures. On the back of this news Sterling slumped to a 13month low against the Euro as investors calculated the weaker performance would rule out any likelihood of a UK interest rate hike. This was clawed back in the afternoon as the ECB also ruled out an immediate hike. Other weak but still positive figures included purchasing manufacturing data and construction figures for April.

US Dollar – US Markets

The dollar was shaken yesterday as jobless claims rose to an eight month high and productivity growth slowed in the first quarter casting a cloud over the economic recovery. Sterling Dollar saw a 1.2percent movement down from daily highs of 1.6543 in the morning to lows of 1.6357 in the afternoon. The Dollar dropped like a lead balloon against the Euro throughout the day with a 2percent difference in the high and low prices.

Euro – European Markets

Eurozone interest rates were kept on hold yesterday at 1.25 percent with the ECB president suggesting that despite some analyst’s expectations, fewer hikes than forecast are likely in the near term. Portugal looks to be hammering out the details of its bailout rescue package and although the terms are more lenient than those of Ireland and Greece, the Portuguese people are likely to be facing a two year recession as Lisbon try to reduce the deficit which currently stands at 9.1 percent of GDP.

Other Currencies – Highlights

Commodity prices have staged a partial recovery in Asian trade after markets were hammered by one of the biggest sell-offs in two years. Silver lost nearly 25 percent of its value in one day and oil drop a record $12 per barrel. Both have made small gains back since. The Australian dollar gained 1.5 percent against Sterling yesterday on a mixed bag of data. It is currently trading at around 1.53 against Sterling. Speak to your broker now to find out how you can protect yourself against adverse currency fluctuations.