Energy Price Hike a Concern to Sterling

Soaring global energy prices has hit the far reaches of the world affecting global economies recently. Not only will you have felt the pinch at your local petrol pump, budget airline easyJet almost doubled its yearly losses to £153 million amid rising fuel costs. Therefore, whilst inflationary pressure remains a constant concern to the Bank of England, today’s report will undoubtedly highlight key factors affecting interest rate decisions over the coming months

Pound Sterling – UK Markets

After a positive start to the week, Sterling approached three-week lows against the US Dollar after reports suggest that BoE Governer Mervyn King will signal interest rates will remain on hold at 0.5% for the remainder of the year. Whilst this is of little surprise to those in tune with recent reports, a point of major concern surrounds Lloyds Bank Corporate Market reports suggesting that King may highlight severe downgrades in UK growth expectations.

US Dollar – US Markets

To give readers an idea about the state of the Dollar, over the past year the greenback is down 8.3% against Sterling, 11.65% against the Euro and a whopping 26.7% against the Swiss Franc. This global freefall is part of the reason that gold and silver has soared to record highs, along with commodity prices. With the volatility and future of the Dollar resting in uncertain grounds, speak to your broker about how to protect yourself against any possible fluctuations. Remember, your currency can be fixed in advance.

Euro – European Markets

Yesterday’s news that Greece’s request for extra aid has been met with stark warning from Angela Merkel. The German Chancellor has revealed that an aid package will only be offered if Greece’s “stability and eagerness to reform is proven”. The worrying figure for the eurozone is that the total bill for dampening the crisis will amount to 256 billion euros once Portugal obtains the 78 billion they are expected to receive on May 16th. Soaring energy prices have bled into Germany’s economy after Europe’s largest economy reported that inflation accelerated more than expected. The figure jumped to 2.7 percent from 2.3 percent in March. With the European Central bank aiming to keep inflation below 2 percent and economic growth gathering speed, concern is mounting that local workers will demand compensation for increased food and energy prices, leading to higher levels of inflation.

Other Currencies – Highlights

The Australian Dollar has reached a 26 year high against Sterling. The news comes on the back of reports that Reserve Bank will bring forward interest-rate increases, spurring demand for national assets. With inflation soaring, Australia’s government has put plans in place to end 23 years of spending following the mining boom. There was more good news for commodity currencies as the Canadian Dollar rose for a third consecutive day against the US Dollar as crude oil advanced after falling last week. Crude oil, Canada’s biggest export climbed to a four day high due to the flooding Mississippi River that will disrupt local refineries.