The pound has gained agaisnt the Euro this afternoon as the forecasts for world growth for the Eurozone are bleak.
The Organisation for Economic Cooperation and Development (OECD) has revised down its forecast for the UK economy in 2009 today. It warns that the UK is in a very sharp recession with output set to contract by more than 4 percent this yest, worse than its previous forecast of a 3.7% fall. The OECD predicts no growth at all in the UK economy nest year and says the UK budget deficit will hit 14% of GDP next year. Its UK forecasts are worse than those the Treasury made during the Budget.
However, we all know that the forecasts made by the treasury this year were about as realistic as my forecasts for my gym attendance, which fell below my ambitious expectations. Hence, the news has done little to dampen the recovery of the pound today back close to 7 month highs.
The OECD also said that the world economy is near the bottom of the worst recession in post-war history, but it adds that recovery is likely to be weak and fragile for some time to come.
The pounds gains were halted and stabilised though, after comments by the governer of the BoE, Mervyn King. He said that he had genuine concerns about how quickly the UK economy may recover.
During testimony to the UK parliament, King also said that a withdrawal of economic stimulus too quickly may create the risk of a renewed downturn, while keeping stimulus for too long risked a triggering of inflation. So, markets remain very volatile as conflicting reports of recovery affect the exchange rates.
Finally, we will take a quick look below at options available to you if you need to buy currency.
First, and apologies to regular readers and subscribers to this blog, but no new updates will be posted here until next Tuesday. Yes, more ‘site maintenance’…… ok, to be honest this time I am climbing Ben Nevis and leave tomorrow for my ‘summit attempt’.
Ranulph Fiennes eat your heart out.
Assuming survival, posts will continue as normal on Tuesday.
Live rate updates in the sidebar will continue as normal.
Should you wish to discuss your requirements, then click the links below to get in touch, and quote BLOG when you do.
Managing Risk – your options
Do Nothing – This high risk strategy means relying solely upon a spot contract and you won’t know the rate of exchange achievable until the actual point of buying the currency. The volatility and unpredictability of the currency markets makes this strategy high risk and speculative. The markets do move both ways, so it could result in a win (or lose) situation, however it does make budgeting for the future virtually impossible.
Secure a Forward Contract – This will enable you to lock into a rate of exchange the moment you know you have a currency requirement in the future. It will protect you against any market movement, both positive and negative and you will know exactly how much the transaction will cost you. The benefits extend to being able to calculate budgetary forecasts for at least the term of the Forward contract.
Use Currency Options –The two key tools are a Stop Loss order, which will protect you against adverse exchange rate movements and secure your currency if it falls below a pre-agreed level. The other is a Limit order, which is placed at the top end of the market to secure currency at a specific price that may not be currently available. This type of contract is particularly useful when the markets are moving in a positive direction for you.
Hedge your bets
Sell half your Euros now, and take a gamble on the other half. This means whichever way the market goes, you’ve got some level of protection, as if the markets do move in your favour, you can still secure your other half at better rates. At the same time, if rates keep moving the wrong way for you, at least 50% has been secured at better levels.