FCD Currency World Cup
Yesterday in the FCD Currency World Cup it was the clash of the Euro and the Australian Dollar as the Netherlands took on Australia in the Fifa World Cup, and true to currency form the Dutch (EUR) triumphed, but only just! Tonight its the much anticipated game between England and Uruguay and so today in the Currency World Cup we will be assessing the face off between the Pound Sterling and the Uruguayan Peso.
England – Sterling (GBP)
The Pound has suffered over the past few years as the financial crisis hit the UK as well as many other economies however austerity measures put in place by the coalition government have taken hold and over the last 6 months the UK economy has really shown strong growth and as a result there is now a good chance that interest rates will rise from the current record low before the end of the year. This has led to a real surge in optimism in the UK and Sterling has really benefited gaining significantly against most the major currencies and the outlook remains positive. An rise in interest rates theoretically makes that currency more valauable as investors can earn better returns on any funds they hold in that curerncy, so as a result demand for that currency increases and so the price goes up making it stronger. A rise in interest rates also signifies that the Central Bank of that country is confident in their economic position which yet again adds to the strength of the currency. So, with this in mind many analysts are predicting Sterling to remain strong over the course of this year.
Uruguayan Peso (UYU)
The Uruguayan currency got its name as the Peso thanks to the European’s who travelled and settled in Uruguay, the current currency was adopted in 1993 and is divided into 100 centesimos. The currency is incredibly unstable and has been devalued significantly on several occassions, with the current currency replacing the previous Peso at an exchange rate of 1 new Peso to 1000 of the old Peso! As a result of this big ticket items such as houses and cars are prices in US dollars and so to try and acheive some form of fairness for Urugauy’s public the currency was loosley pegged to the Dollar however in 1982 this peg was broken throwing thousands of companies and individuals into banktruptcy and then in 2002 the country suffered a huge budget deficit and the currency lost 50% of its valus in a couple of weeks which again caused huge levels of financial difficulties for individuals and companies. The country continues to struggle with their currency rates and the with exports making up a large part of their economy a weak currency is actually quite beneficial but an overly volatile currency is not. The government and the Central Bank of Uruguay continue to look for a solution to this.
So, when comparing the two currencies it is clear that Sterling is by far the stronger of the two with 39UYU to £1. So, surley the result tonight is a forgone conclusion….
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