Sterling declined heavily today across the board as further pressure was put on the currency. The market has appeared to turn on the Pound following a week of uninspiring economic data and an austere budget.
On top of high inflation and worse than expected public sector net borrowing today’s retail sales were also very poor. Economists expected a drop of 0.6% to be announced and were surprised when sales actually dropped by 0.8%. Though this figure is not catastrophic it does add to the general gloom engulfing the UK.
Sterling today lost 1.3% of its value against the Euro, 1.42% against the Australian Dollar and 2% against the New Zealand Dollar. The Pound is currently at a 6 month low against the Euro and has only been lower than this once in just under a year. Anyone looking to bring funds back to the UK from Europe, perhaps after selling a property would be well advised to do so now. The currency provider Tor FX can help you do this and can provide you a quote by clicking on the icons on this web page.
This week also saw the release of March’s Bank of England minutes from the Monetary Policy Committee. They showed no change from February with just three members voting to increase the base rate of interest, and one of these will be leaving by the end of the year anyway. Five members of the MPC need to vote for a hike for interest rates for a change to take place.
The Euro has been unexpectedly strong today despite the dissolution of Portugal’s government and likely bail out of their economy. Moody’s the credit ratings agency also downgraded thirty Spanish banks today.
However as Portugal only accounts for 1.8% of the European Gross Domestic Product, any unrest has a limited impact on the overall economic outlook. Of slightly more concern is the Spanish economy, which accounts for 10% of European GDP, but while credit downgrades are limited to regional banks don’t expect the Euro to suffer.
Markets seem to now be looking beyond peripheral European debt concerns and are focusing the stronger European economies. Positive market sentiment has also increased demand for higher yielding currencies. As the European Central Bank looks likely to increase interest rates in two weeks the Euro is becoming increasingly in demand. Other high yielding currencies that were purchased today are the Australian Dollar, which increased by about 0.7% against the US Dollar and the South African Rand, which increased by over 1% against the US Dollar.