Triple Dip Doom and Glooom
28 March, 2013
The focus for much of this week has largely been upon the ongoing crisis in Cyprus as all eyes watch to see exactly how it will attempt to recover with ECB support from recent events. The effects of this crisis have certainly been felt by the single currency with the pound rising to five week highs against the Euro despite some very poor data releases. Much of the market waited with baited breath yesterday as UK GDP revision figures were released – spelling the continued possibility of a triple dip recession – waiting for it to lose ground against the Euro, however it did not and continued to gain. This was also despite news from the BoE that UK banks must raise an extra 25bilion in capital by the end of the year to guard against potential losses.
Elsewhere this fairly dire news from the UK which gives strong indication there may be further QE, saw the pound only slip slightly against the US dollar, whilst interestingly despite losses against the pound the Euro gained 0.3% against the dollar following an increase in German retail sales.
Today we see the Cypriot banks re-open with customers only allowed to withdraw 300 Euros a day, not allowed to write cheques, and restrictions meaning travellers can only take 1000 Euros out of the country with them. Furthermore transactions between 5-200k having to be reviewed by a committee, whilst those over 200k require individual approval. Many feel these restrictions will be in place for months, and no doubt the situation will continue to weigh heavily on the single currency.
The pound has been one of the worst performing currencies in 2013 – at its worst dropping 7% against the Euro and over 8% against the dollar. Worryingly this drop as many analysts warn is also prior to the effects of the recent UK budget being felt in the market. The concern over the UK and sterling is also rising as questions are raised about the UK’s credit rating, the effects of the budget and whether or not there will be further economic stimulus later in the year. Albeit low sterling rates increase exports there is an ongoing fear that these underlying factors, could over the coming months further decimate the pound, unless it can somehow pull a Houdini like escape from its current economic woes. Without doubt these fears and the Cypriot situation will be the major factors in the short term affecting the GBP/Euro rate.
Sadly Currency Index can’t fix the UK economy, but we can help you fix exchange rates up to two years ahead and can beat your banks rates by as much as 4% – something which can only help in the current situation. Should you have any upcoming transfers, do make sure you speak to your Currency Index broker as the volatility seems to be continually increasing in the markets, as do the concerns for the UK economy.
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