Sterling gains against Euro & Dollar. April 2010 Outlook.

Good Morning. The pound rose against the Euro and US Dollar yesterday, after better than expected GDP data and other better economic news. However the outlook for Sterling remains clouded by political uncertainty. Rates @ 08:30am 31st March are as follows:

  • GBP/EUR 1.1220
  • GBP/USD 1.5062
  • GBP/AUD 1.6460
  • GBP/NZD 2.1219
  • GBP/CAD 1.5313
  • GBP/CHF 1.6057
  • GBP/JPY 140.35
  • GBP/ZAR 11.043
  • EUR/USD 1.3421

UK Growth revised up
The UK economy emerged from recession in the fourth quarter of last year at a faster pace than previously estimated, official figures have shown. Data from the Office for National Statistics said the economy grew 0.4% between October and December in 2009. This was faster than the previous estimate of 0.3% growth during the quarter.

The better figures boosted the pound, and exchange rates rose against the Euro and US Dollar.

Sterling’s rise was briefly dampened though, after UK finance minister Alistair Darling said in testimony to parliament’s Treasury Committee that depreciation of the pound had helped exports. I’ve always found this a bit strange. Of course it will help exports, but the fact is we don’t really export that much from the UK. We import far far more than we export, and so while a weak pound is good news for some, including clients selling property and bringing Euros back, for most it is bad news.

Euro falls on German growth forecasts
Another reason rates for GBP/EUR rose is the fact the International Monetary Fund (IMF) has cut its 2010 growth projection for the German economy. The IMF now expects Europe’s largest economy to grow by 1.2% this year, down from its previous estimate of 1.5%.

Explaining the downward revision, the IMF highlighted weakness in the German banking sector, and the chance of lower than expected levels of global trade. The German economy exited recession last year, but failed to grow in the three months from October to December.

Germany is the biggest economy in the EU, and so poor forecasts weakened the Euro slightly making it cheaper to purchase.

Political Uncertainty
Fears remain that in the upcoming general election, we will be left with a hung parliament where no party has overall majority. This would mean Gordon Brown stays in power, and that they continue their plan of creating money and spending their way out of our problems. I don’t know about you, but if i have no money, I try to save, not spend. World markets are of a similar opinion and so if we do indeed have a hung parliament, the pound is likely to weaken.

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