What a great week that was for the much maligned British economy. First the rate of inflation fell to 2.2% in September from 2.5% in August, quickly followed by more good news as unemployment fell to a 15 month low. Then finally retail sales rose 0.6% last month, more than making up for a 0.1% dip in August. All looks great or does it? Firstly, although inflation fell utility prices are set to rise by between 6% and 9%, food prices are set to increase after a poor harvest in the US and finally The Potato Council says a poor harvest here could push up the price of Britain’s favourite staple by as much as 40%. Secondly, although the number of employed people in Britain rose by 212,000, more than half of the increase was a result of part-time job creation. Thirdly, retail sales may have risen but it was mainly due to the purchases of school uniforms and new winter wardrobes. At the moment it looks like the jury is still out on the UK economy and although the ‘green shoots of recovery’ maybe beginning to sprout, there is still a long way to go. With that in mind we do feel that pressure is likely to remain on the GBP in the coming months and another move lower should be on the cards as we head into 2013.
To find out how you can protect yourself from any adverse currency moves please call us on 01494725353
Meanwhile over in Europe……
……on Thursday we witnessed yet another gathering of Eurozone leaders in another attempt to shore up Europe’s fragile economies and to try and restore confidence in the Euro. Way back in May 2010 when the Eurozone first met following a plea from Athens for financial help, who would have thought that 19 meetings later we would be no closer to a resolution. With Greece, Ireland and Portugal already bailed out it now looks like only matter of time before Spain is next on the list. Although the ECB’s recent bond purchase programme may have provided a degree of stability it does not solve the Euro-zone recession and doesn’t address what happens if countries fail to meet their austerity targets. The net result of all this is that investors are likely to remain cautious about the Eurozone generally and therefore it looks like the Euro is likely to come under selling pressure once again as we move towards the end of the year. As such any further losses from current levels should be fairly limited and we feel it is only a matter of time before GBP heads back higher once again.
To find out how you can protect yourself from any adverse currency moves please call us on 01494725353
And finally in other news……
…..the Australian Dollar is likely to come under fresh pressure in the coming weeks as next week’s budget update will reveal spending cuts and revenue measures to claim back an additional $4 billion this financial year. In addition the budget is likely to reveal that deteriorating international conditions and collapsing export prices have knocked $21 billion from projected tax revenue. With the Australian economy so heavily dependent on its export of raw materials the country is starting to feel the pinch as the prices of iron ore, thermal coal and coking coal have fallen by 15 to 35 per cent since May. These have been the three big commodities driving Australia’s economy over the past few years fuelling China’s uncontrollable growth. But with China’s the world’s second largest economy now having slowed for seven consecutive quarters it has started to hit the once untouchable Australian mining sector hard. With that in mind we do feel that any further losses for GBP should be fairly limited and pressure on the Australian dollar should increase as we move into 2013.
If you have an upcoming requirement and you are concerned about what effects currency volatility can have on you call one of our experts on 01494725353.
