Main banks pass stress test

This morning saw the results of the Bank of England’s ‘stress test’ on UK banks – the Co-Operative Bank was the only one to fail badly, requiring a ‘revised capital plan’, but RBS and the Lloyds Banking Group were also found to be in need of further strengthening.

The stress test was designed to predict what would happen if there was another financial crisis, with scenarios such as the Pound falling in value by 30%, and house prices by 35%.

Barclays, HSBC, Santander and Nationwide all passed the test, and Mark Carney said the banking system was “significantly more resilient” than in 2008. The Pound reacted with some positivity, with exchange rates up slightly when the results were announced at 7am. The Pound has however fallen back in early European trading since then.

Inflation figures to move exchange rates next?

The next major economic data in this packed week, is inflation at 9.30am in the UK. If CPI for November comes in below expectations of 1.2% we are likely to see trouble for sterling, as the number drifts further away from the government’s 2% target. This is rapidly followed by German economic sentiment, Eurozone trade balance and US housing figures all out later today. The fun continues tomorrow with the Bank of England minutes and we are expecting further volatility for exchange rates through the week.

Do consider fixing your rate before the last minute at this uncertain time of year. One thing off your to-do list and having your international payment prices secured could also save a significant amount if we see rates move the wrong way over the coming few days.