Yesterday the Governor of the Bank of England, Mervyn King stated that he expects the Diamond Jubilee to cause the UK economy to contract between April and June as many people have time off work. However, these comments may purely be King trying to pre-empt a second quarter of negative growth the day before the final revised Gross Domestic Product (GDP) figures are due. There is an argument though that the Jubilee, like the Royal Wedding last year will produce a “feel good factor” especially combined with some good weather and the fast approaching Olympics and this feel good factor means people will spend more money which will help boost the economy.
In his speech yesterday King did say that he expects the economy to zig-zag in and out of growth over the course of this year and although this may be correct it does not give much certainty for Sterling exchange rates. GDP figures are due at 9:30am today.
Meanwhile in Europe the head of the Organisation for Economic Co-operation and Development (OECD) has called for the Euro rescue fund to be increased to €1 trillion (double its current level) in the light of a number of EU countries falling into recession. Germany, currently the largest contributor to the fund has questioned this figure and has stated that the fund should only be raised to €700 billion. While the debate about the level of funding in the bailout pot continues it is possible we will see investor confidence in the single currency economy wain and therefore could see Pound Sterling Euro exchange rates weaken.
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