This report will examine the factors that could affect exchange rates this week in order to help you stay informed if you need to make a currency transfer. For current live exchange rates click here.
Yesterday the Chancellor of the Exchequer George Osborne announced the latest UK budget. Some of the key points from the budget included:
The news that the government have downgraded their growth forecast for the country is clearly not good news. What made it even worse was that this news and the rest of the budget was published by the Evening Standard before the budget had even been announced by the Chancellor!
Mr Osborne also announced that the Bank of England (BoE) would no longer be responsible for just inflation but also the overall growth of the economy. I am not sure whether Mervyn King and the rest of the BoE will be pleased with this considering the minutes yesterday showed another split vote on Quantitative Easing (QE) clearly highlighting the difficulty they are having in deciding how to get the country out of the mire we are currently in.
Osborne also went on to say that the BoE should consider using unconventional monetary tools to help the economy grow and that QE was “the central plank of his economic plan”. To me this clearly states that we will be faced with more QE in the coming months and that with Osborne placing the responsibility with the BoE for getting our economy growing again it’s his last throw of the dice to prevent the dreaded triple dip recession. Later today we have UK public sector net borrowing and retail sales figures due which could lead to another busy day for Sterling.
Last night the Federal Reserve Bank of America (FED) kept interest rates on hold at 0.25% and also left its bond buying scheme in place. This was unsurprising as the US economy contracted in the last quarter of 2012. The FED also stated that interest rates will not change at least until unemployment falls below 6.5% - it currently stands at 7.8%. Despite a struggling economy the Dollar remains strong and I would be surprised if we see the Pound gain any ground against the Greenback. If you need to buy USD call us today.
We have heard this morning that the president of Cyprus will present a “plan B” to fund a bailout and rescue the country. It is possible the new plan will include a levy on bank deposits of over €100,000. It has been announced that the Cypriot banks will remain closed until at least Tuesday and leading figures from Germany have said that if a bailout is not agreed the banks “may never re-open” so plan B better be good!
While Cyprus may be one of the smallest economies within the Eurozone one of the biggest concern is the precedence this situation sets for other struggling economies. If Cyprus default Mario Draghi’s comments that they would not let any EU member state fail will be put to the test. I expect that while the banks remain closed and no resolution presents itself we will see the markets remain volatile. If Cyprus did default it would not surprise me to see GBP EUR head back towards the 1.18 levels but should Cyprus manage to get themselves out of the mess they are currently in we could see the Euro recover against Sterling back towards the 1.15 mark. Either way, what is certain is that the next few days will be crucial.
Last night the latest Gross Domestic Product (GDP) figures were released for New Zealand which showed that their economy grew by 3%. This growth puts the UK economy in the shade and because of this positive news we could see some excellent opportunities for clients looking to sell NZD this morning. For the latest NZD exchange rates click here or alternatively call one of our expert currency brokers on 0800 328 5884.
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