The UK economy is likely to continue to contract at a rapid rate with further interest rate cuts and more unusual fiscal policy steps needed in the short term. Such was the downbeat nature of the ‘Quarterly Inflation Report’ with many speculators marking sterling down heavily as we predicted.

The report did show that the bank expects a sharp return to normality in 2010 although most economists have rubbished this as fantasy. We can but hope of course.

Tim Geithner attempted to fight back against those who said that his speech that rattled with the sound of non-specificity and heightened risk aversion. He left the door open to further requests for cash however which will have furrowed a few congressional brows.

Sterling has started the day on the back foot and we would look for it to head lower in the short term against both EUR and USD.

There’s quite a bit of US data today including initial jobless claims and advanced retail sales which may only serve to heighten the risk averse atmosphere of the past few days.

Apologies for the rate foul-up yesterday and thank you to those who pointed it out.

Further analysis is of course always available at our video blog http://uk.youtube.com/user/WorldFirstJC

Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.

To view any past or present currency blogs please click on the following link www.worldfirst.com/blog

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