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It was shake, rattle and (sausage) roll for the markets as they digested the possible fallout from the combination of an earthquake in Mexico City and a possible global pandemic of swine flu. Stock markets were hit hard yesterday as airline, hotel and travel shares were hammered lower while healthcare and pharmaceuticals saw an equal and opposite rise.

Risk aversion has naturally heightened on fears of a pandemic and sterling, still seen as a risky asset, started off low. Our assertions that while the budget would hurt GBP/EUR in the short term the long term trend is in sterling’s favour began yesterday as GBP gained 1% against the single currency. This was even after a fall off in UK mortgage approvals earlier in the day.

It is a very quiet data day today and as such markets will be more focused on risk aversion / appetite. While the WHO has upgraded the swine flu threat from a 3 to a 4 out of 6 with 6 being ‘widespread human infection’ strains outside of Mexico seem to be less virulent and, at the time of writing, no fatalities outside of Mexico have been reported. The near term effects will be anti-risk and so sterling may see slippage in coming days.

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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.

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