Sterling was boxed around the ears fairly viciously by its USD and EUR sparring partners yesterday as data and sentiment exposed the UK economy’s weak jaw.

The moves lower were initially triggered by a terrible trade balance reading that showed that despite the recent near 30% falls in the value of sterling the export market is still pretty slim. The mood for exporters may not get much better with the pound expected to strengthen over the course of the year leaving unhedged positions at risk.

Comments from the British Chambers of Commerce that the current economic climate in the UK is ‘frightening’ also did nothing to help sentiment in the pound.

Ben Bernanke, Chairman of the Fed, was in London yesterday to give a speech at LSE on the financial crisis in which he reiterated his support for both the TARP and the stimulus package due to be enacted in the first days of the upcoming Obama administration.

The US trade balance figure was also pretty shocking with lower oil prices and lower imports hammering the figure to over -$40bln.

The German economy has announced a €50bln stimulus package in order to give domestic demand a shot in the arm. This will take their fiscal deficit to 2% whereas the UK’s and US’s are sitting at a fairly corpulent 8% already. But will this be enough; sipping is all well and good when you’re looking to not burn your tongue but eventually the potion goes cold and a blast in the fiscal microwave could be needed.

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.

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

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.