A report released from the National Institute of Economic and Social Research (NIESR) has predicted that the UK economy will enter recession in the first half of the year. Last month we saw official GDP figures show the economy shrank in the last quarter of 2011 meaning we are officially halfway to recession and now that the influencial think tank, the NIESR, have prediceted recession it will only go to put more pressure on Sterling exchange rates.

The last time we entered recession we saw Sterling lose several cents against all the major currencies especially against the Euro and US Dollar. With the UK heavily exposed to the Eurozone debt crisis and with a stagnant housing market and rising unemployment the threat of recession has increased significantly, so for those clients looking for exceptional exchange rates on transferring money abroad the question is what will this mean to the rates of exchange?

If history is anything to go by recession could lead to major Sterling weakness and the current high levels we are witnessing against some of the major currencies (GBP-EUR close to a 16 month high and GBP-USD at around a 5 week high) could be short lived. Recently there has been increased talk of further Quantitative Easing (QE) in the UK to try and stave off recession so next Thursday’s interest rate decision, where QE could be introduced, will be very important for any clients looking to sell Pound Sterling and transfer money abroad. While QE could be used to help reduce the chance of recession it also increases the amount of Sterling in circulation which reduces its value therefore resulting in the exchange rates falling.

If you would like to talk to a currency expert to discuss your requirements, the market outlook and the options available to you please call us today on 0800 328 5884 / +44 1494 725353 or email us at info@currencies.co.uk.