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It was a muted start to the week yesterday with traders unsure which way to push and pull and volume was therefore really very sparse. The main beneficiaries were the haven currencies (CHF, USD, JPY) as sentiment towards risky assets remained feeble; most equity markets were slightly in the red as well through yesterday’s sessions.

The main bit of focus for the UK was the IMF’s audit of the UK economy and how the path to recovery was progressing. It was a ringing endorsement from the men of Washington for the men of Downing and Threadneedle St and we suspect Chancellor Osborne went to bed with a smile on his face. The broad tone was that it is not time to change tack. The IMF did downgrade the growth target in the short term however the acting managing director John Lipsky said that this was a result of “largely temporary” factors. They also laid out some scenarios in which a change of policy may be needed such as:

 “Conversely, if the economy experiences a prolonged period of weak growth and high unemployment—and if inflationary pressures consequently ease—fiscal automatic stabilizers should operate freely (as the fiscal mandate is designed to allow) and the current monetary policy rate should be maintained for an extended period. In such a risk scenario, it will important to ensure that the slowdown does not become entrenched due to capital scrapping and cyclical unemployment becoming structural. This is not the central scenario, but if this appears to be in prospect, then some combination of the following would need to be considered: (i) expanded asset purchases by the Bank of England and (ii) temporary tax cuts”.

Sterling slipped a little after the fund downgraded growth to 1.5% in the short term, below the Office of Budgetary Responsibility’s estimate of 1.7% and GBPEUR moved into the 1.11s while GBPUSD spent all day below 1.64. A poor figure from the British Retail Consortium overnight has chipped sterling lower too with the latest survey suggesting that sales fell by 2.1% in May.

The euro looks like it wants to strengthen further versus the pound today and is set up for a good round of data with EU retail sales at 10am and German factory orders are out at 11am. Both are expected to rise from their previous reading and move into the 1.10s on GBPEUR cannot be ruled out.

Are you keen to learn more about the currency markets from our industry leading team of experts? If so, you’re in luck.

World First will be running a FREE 30 minute seminar, offering foreign exchange advice to SMEs – the life blood of the UK’s economy.

We’re interested in getting some discussion going and to assist SME’s in a tough market. We’re not here to sell to you.

Come and join us for a cup of coffee and a doughnut as we get to grips with some of the major issues facing small to medium sized business in the current climate.

Email Natasha.Farnworth@WorldFirst.com to RSVP

Date: Tuesday June 14^th at 17.00 in Central London

Latest exchange rates at time of writing