Pound falls on UK debt data

Good Morning. Looks like the good run for the pound is over, as Sterling fell broadly on Thursday, hitting a 1 week low against the US dollar on concerns about UK fiscal health and very weak UK money supply data. Due to Euro weakness however, rates remained only slightly down against the Euro. Rates @ 08:30am are as follows:

  • GBP/EUR 1.1501
  • GBP/USD 1.6270
  • GBP/AUD 1.7909
  • GBP/NZD 2.2707
  • GBP/CAD 1.7033
  • GBP/CHF 1.6912
  • GBP/ZAR 12.247
  • GBP/JPY 146.92
  • GBP/NOK 9.4044
  • EUR/USD 1.4139

UK Debt concerns keeps pound weak
UK government borrowing hit a new record for the month of December, and the total borrowing for the first nine months of the financial year was £120bn – the most since records began in 1946. This caused the pound to fall, and (apologies to regular readers for the broken record!) we’ve been saying in this blog for some time, that despite signs of a recovery for the UK, these huge debt levels will hinder recovery for Sterling.

It shows the impact of recession on the UK’s finances, with tax revenues hit, and extra spending on measures to help the economy and on rising benefits. Analyst Jonathan Loynes at Capital Economics said concern about the UK’s finances and credit rating was unlikely to ease until “more decisive corrective action” was unveiled. What do I read into that? Well, I don’t expect any decisive action until after the general election.

Of course, with GDP figures next week expected to show the UK is out of recession, there may be spikes and gains much as we’ve seen this week. However these may well be short lived, as there is no plan at all on how to reply all this debt, other than Gordon Brown saying “Don’t worry, I’ll half it…”

So, don’t be lulled into a false sense of security with regards to the recent gains in the pound. If you need to buy currency with Sterling, then consider the risk and make an informed decision on what course of action to take.

Leaving it to chance in the hope things will move your way is nothing more than a gamble. The majority of our clients are businesses and private clients buying property abroad. If you’ve, say, £100’000 to move to Euros, and you’re happy to gamble with your hard earning £100k, then you’re much braver than me!

Today’s Data
EU – Consumer Price Index
EU – Trade Balance
US – Consumer Price Index
US – Consumer Sentiment

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