UK election - a result?

Sterling weakness will continue to be exacerbated by the UK’s hung parliament and ensure further fluctuations this week. Remember to stay in touch with your broker at Foreign Currency Direct for updates. If you don’t have one open a free no obligation trading account in minutes.

For the pound to really regain strength long term, the UK needs to have stability and direction in its fiscal policy, which I believe rests first and foremost with the budget deficit reduction programme. Whilst all potential new leaders agree we must tackle this alarming issue (the amount by which a government’s spending exceeds income - the UK’s being the highest among the G7 nations), formulating the wide reaching policy required will take time and prove difficult under the current political situation. The markets will be very sensitive today so please keep up to date with these developments through Foreign Currency Direct on Freephone 0800 328 5884.

The Conservative and Liberal Democrat talks are ongoing and not expected to yield results today. However expect further dithering or a breakdown in talks to generate possible shifts of up to 3-5 cents on both the GBP-EUR and GBP-USD rates as per Friday, since alternative solutions will not be well received.

PIIGS will not fly away

The PIIGS of Europe (Portugal, Ireland, Italy, Greece & Spain) are all countries singled out for fiscal woes that threaten to undermine the stability of the single currency. EU Finance ministers and the IMF (International Monetary Fund) have this weekend negotiated a package worth €750 billion to inject liquidity into the PIIGS and stop the Contagion. The root causes of the situation – lack of growth and severe government budget deficits mean this bailout may once again only be a stop gap. The markets will very likely warm to this short term solution but there are wide ranging political and economic implications that will move the market so do keep in touch with your broker as more details emerge today because a well timed decision on buying or selling Euros will save you money.

Wall St. is watching

Last Thursday saw a record drop on the US stock market of 9.2%. It did recover, but closed down overall, reflecting the jitters global financial  markets are experiencing. The US Dollar did however continue to make strong gains against Sterling and the Euro. Depending on how the hung parliament and Euro package is received, I would expect the US Dollar to make further gains this week . International clients can stay in touch with us on +44 (0) 1494 725353 for live market updates.

Market Data Releases

UK BANK OF ENGLAND: Interest rate decision (on interest rate offered to banks) & Quantitative Easing 12.00 GMT (neither anticipated to rise but will be closely watched)

EUROPE: Numerous Maufacturing Data (Imports / Exports) 06.45 – 0900 GMT (will outline Europes direction out of recession)

If you add together the Hung Parliament, Greece and US stock market fears there are plenty of ingredients to shape further volatility this week. Please keep in touch with us on Freephone 0800 328 5884 or e-mail jmw@currencies.co.uk to determine the most rewarding time to secure our award winning rates.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.