Research yesterday showed that the Bank of England could be forced into extending their Quantitative Easing (QE) programme by a further £125 billion the rumour of this also sent Sterling exchange rates down against a number of major currencies especially the Euro. The reason stated for the additional QE was the UK’s exposure to the Spanish banking issues, a possible Greek exit and still a weak UK economy which shows little signs of a recovery. In fact we may see rumours of QE next week when the Bank of England minutes are released as if the shadow MPC (a group who predict the MPC’s discussions and decisions) stated that it may have been a close run thing whether to increase QE this month or not. As we have seen the in the past QE can have a negative impact on Sterling exchange rates and so should this figure of £125bn be correct we may see the Pound come under more pressure as investors and analysts see QE as an admission that the economy is in a bad way!
In Europe this morning we have heard that both Spain and Cyprus have had their credit ratings downgraded due to their exposure to a Greek exit and a worsening economic conditions in Europe. Spain, who have recently received a €100bn bailout for their banking sector are now just one notch above being classified as junk status. Cyprus appear to now be the next in line to hit the headlines as they move closer to requiring a bailout and could be added to the group of Ireland, Greece, Portugal, Spain and Italy as countries going through tough austerity measures in order to try and recover from the economic slump they are currently in.
With more and more countries being added to the list of countries in economic trouble in Europe we can expect to see more pressure on Euro exchange rates but also this pressure can spread to the UK and Sterling exchange rates due to our close links both geographically, economically and through trade. So, if you have an upcoming currency requirement and would like to discuss all the options available to you to help you get the best exchange rates make sure you speak to one of the experienced currency brokers here at Foreign Currency Direct plc who will be happy to help. You can call straight through to the trading floor for free on 0800 328 5884 or email me directly on firstname.lastname@example.org.