Sterling remains under pressure

The pound remains under pressure this morning, and GBP/EUR has dropped into the 1.15’s. There was very little data yesterday, so the main reasons for the fall are likely to be the poor unemployment figures released on Wednesday:

Market Snapshot @ 08:30am

  • GBPEUR 1.1584
  • GBPUSD 1.6320
  • GBPAUD 2.0406
  • GBPNZD 2.5309
  • GBPZAR 13.268
  • GBPJPY 152.78

This week’s IMF report was also of importance, as they warned that the pound could be at risk from uncertainty and urged Prime Minister gordon Brown to set out a clear path for reducing national debt.

IMF
The International Monetary Fund has delivered its sharpest rebuke yet on the ‘dramatic deterioration’ in Britain’s public finances. In a major blow to Gordon Brown, the Washington-based fund warned the UK is ‘testing the limit of the market’s confidence’ by pushing the national debt towards 100 per cent of gross domestic product – or close to £1.5trillion.

If Britain does not do more to tackle public spending, faith in the Government’s ‘solvency’ could be damaged, it said in an economic health check. This means that for the short term at least, we expect the pound to continue to be pressured.

Health
The government has also warned that deaths from swine flu this winter could be between 19,000 and 65,000 in the UK. Experts said it was impossible to predict exactly, but with a third of the population perhaps becoming infected in the coming months the death toll could rise to such numbers. The World Health Organisation has also described the pandemic as the fastest-moving one ever, adding it was now pointless to count every case.

Even Cherie Blair has the virus, which I am sure is causing you as much concern and worry as it is me.

The figures have been critised as inducing panic amongst the general population, given that in ’99/’00 there were 21,000 flu deaths. Regardless, the fact that the NHS and government spending on this will increase pressure on the public purse, the net result can only be further weakness for the pound, as investors become risk averse.

Todays Data
EU – Construction Output
EU – Trade Balance
CAN – Consumer Price Index
US – Housing Starts
US – Building Permits

Site Maintenance
Now, many regular readers will be aware that from time to time, due to site maintenance, this blog goes through occasional periods where it is not updated.

Well, next week there will be site maintenance all week long, which I will be carefully monitoring from the sunshine island of Mallorca 🙂

On Monday, a weekly report for all of next week will be published here on our main site. Ensure you quote ‘Blog’ when you get in touch.

Of course, daily reports will continue from the 27th July onwards. Enjoy your weekend.

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