An overview of the last couple of weeks...

We have had a busy few weeks so far in terms of economic data being released and this has obviously had a knock on effect for the currency market.

As the UK economy has faced a turbulent few weeks so has Sterling! We have seen 10-month highs against the US dollar breaching the 1.7 mark on top of encouraging movement to the high 1.18’s against the Euro. This has been helped over the past month with some better than expected housing and retail data. However, the pound has fallen back after recent data releases such as the rise in unemployment. These peaks and troughs point to the foreign exchange markets staying volatile for the foreseeable future.

The biggest piece of news received was on Thursday 6th August as the Bank of England announced the introduction of a further £50bln in quantitative easing. This overshadowed the fact that interest rates were kept at an all time low of 0.5%. The extra injection meant the total spend for quantitative easing has risen to £175bln, £25bln more than the initial £150bln put aside by the Chancellor (http://uk.reuters.com/article/idUKLNE57502120090806) . The increase in quantitative easing was due to the fact that the UK recession “appears to have been deeper than previously thought” according to the Bank of England.

The increase in quantitative easing has harmed the pound significantly, especially against the US dollar. Since the announcement the pound has lost more than 5 cents against its American counterpart, down to 1.6440 (12/05/09). The pound has stayed weak after unemployment rose by 220,000 people to its worst levels since 1995. Unemployment now stands at 2.44 million and is expected to rise further in the coming months. This is a good remainder that we still have clouds hanging over our economy and its future growth. This sentiment is echoed by Bank of England Governor Mervyn King who stated that any recovery in 2010 will be “fragile” when the inflation report was released on Wednesday 12th August (http://news.bbc.co.uk/1/hi/business/8196465.stm) .

Here at Escape Currency we have a team of traders who know the markets inside out. We make sure any client, whether they are buying property or paying a supplier overseas is fully aware of market movements and how it affects them. Our aim is to save our clients money and we will continue to do so even during these difficult times.