Foreign Exchange - UK Daily Update - Written by rick on Friday, May 22, 2009 7:47 - 0 Comments
Sterling fights back from S & P rating downgrade - World First’s Morning Update - 22nd May 2009
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GBP was almost slain by an outlook downgrade by Standard & Poors yesterday morning before spending most of the afternoon fighting to regain the lost ground.
GBP/USD fell from 1.58 to 1.5452 in the space of 20 minutes as traders around the globe sold sterling against anything they could find. The basis of the downgrade by S&P was over mounting government debt and political uncertainty with one analyst putting the chances of Britain losing its AAA gilt status in the next 2 years as ‘1 in 3’. All in all the debt to GDP ratios that everyone balked at during the budget, the highest being 79%, could feasibly reach 100%. Were that to happen the UK would lose its AAA status, pension funds would sell gilts and exacerbate the fall while sterling plummets through the floor.
The fight that sterling has made over the afternoon is encouraging however. Markets are aware that while the UK is by no means a shining pillar of how to weather the recent financial storms she is by no means the most battered ship in the fleet. The elephant in the room is the US; were the US economy to be hit with a similar downgrade the dollar would lose ground faster and for a more prolonged time period than sterling did yesterday. Even including the downgrade we are still happy that by Q3 / Q4 of this year GBP will be in a stronger position than it currently sits in. The near term will be choppy however and could start as soon as tomorrow should the GDP figure print worse than expectation.
Green shoots still poke through for sterling however as a bullish retail sales figure was overshadowed by the S&P downgrade. Retail sales printed at 0.9% against an expected 0.5%, and while it’s a good sign rising unemployment and uncertainty about job prospects will keep the High St in check.
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| Indicative Rates | Sell | Buy |
| GBPEUR | 1.1302 | 1.1329 |
| GBPUSD | 1.5757 | 1.5786 |
| EURUSD | 1.3929 | 1.3953 |
| GBPJPY | 147.95 | 148.67 |
| GBPAUD | 2.0239 | 2.0297 |
| GBPNZD | 2.5679 | 2.5750 |
| GBPCAD | 1.7865 | 1.7932 |
| NZDUSD | 0.6115 | 0.6150 |
| GBPZAR | 13.16 | 13.21 |
| USDZAR | 8.32 | 8.39 |
| GBPPLN | 4.9839 | 5.0208 |
| EURJPY | 130.77 | 131.31 |
| Rates are dependent on amount transacted Please call 0207 801 9080 for a live rate quote | ||
Please feel free to contact me jeremy.cook@worldfirst.com(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 on 020 7801 9050 or ourPrivate Client Currency Exchange 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..
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