Pressure piles on the pound

18 April, 2013

Matthew Boyle

Pressure seems to be increasing once again on the pound again this week as yesterday it was announced that UK unemployment rose by 70,000 to 2.56 million, taking the rate up to 7.9%. Sterling woes continued this morning as retail sales came in slightly better than anticipated at -0.5% as opposed to -0.6 although still a relatively poor result. Certainly concerns for the UK economy have been growing this week as Wednesday’s BoE minutes showed there is still division amongst committee members as to whether further QE is required – something which if increased will influence the economy and indeed the exchange rates massively. Indeed the notion of further QE has been present for some months and whilst this uncertainty is apparent, the pound will continue to suffer from weakness over fears that this is an inevitable necessity. Doubts and fears for sterling are likely to remain high moving into next week as we see growth figures for Q1 released, with many analysts fearing that this is likely to show the UK is in recession, again something which has been on the cards for a number of months.

As a result the Dollar and Euro continue to benefit from pound weakness with both making gains. However despite gains against the pound, the greenback lost ground against 16 of its major counterparts amidst fears that the number of Americans claiming jobless benefits is likely to increase when the report is released later today. These losses were mitigated in part as the Fed released its beige book which highlighted growth in the manufacturing and construction sectors.

Elsewhere Japan is also battling huge economic problems as it announced the annual trade deficit has risen to 8.17trn yen – the ninth month in a row now a deficit has been reported. This has seen the yen pretty much decimated by competitors across the board, and against the US Dollar has lost 20% alone since last November.

With a relatively quiet few days ahead in the way of data releases it is likely the major pairings will continue their individual tug-o-wars with much of the focus on next week’s UK GDP figures which will force the address of the question – is the UK in, or heading for a triple –dip recession.

Certainly despite turbulence in the global market, the focus in the short term must remain at home, on the UK and its economic situation. No doubt concerns for another recession and potential further QE go almost hand in hand, so certainly the coming weeks will be important for the pound and are likely to be volatile – anyone with Currency transfers involving buying or selling Sterling would be well advised to speak to your Currency Index broker to ensure you aren’t caught out by any sudden market movements. Stay well informed and well ahead of the markets with Currency Index.