httpvh://www.youtube.com/watch?v=HdP94FNYQo0

The government has been focussing on the May 5^th referendum on voting over the past week, and as the day draws nearer tensions are stretching to boiling point. Cameron warned the British public today that there were dangers to the electoral reform which could undermine the young coalition government. He is worried about the distraction caused by the Royal Wedding and the Bank Holiday bonanza which approaches, in a speech today he said we could ‘sleepwalk into the second-rate system, waking up with a voting system that damages our democracy permanently.’ Fighting talk from our Prime Minister, especially as he is up against half of his own coalition. Clegg, Cable and even Miliband are pushing the case for the new voting system, and the outcome means a great deal to all three party leaders. A defeat in the referendum would cause further weakening to Clegg and Cameron would not want his own side weakened, but faces a backlash from his own party.

Asking prices for houses in England and Wales have nudged 0.1% higher in April compared with a year ago, which was small compared to the 0.9% annual gain in March. Monthly asking prices rose 1.7% in April which was a large jump compared to March. The most interesting part of this survey by Rightmove is that there was the biggest monthly rise in unsold properties in almost four years – which leads us to believe the British property market is stagnating. Prices are likely to fall in coming months what with the spending cuts and tax hikes kicking in. Perhaps the news of a flat selling at the Candy brothers’ One Hyde Park development for more than £135m leaves a sour taste…

In other news, a survey conducted by retail consultants Trevor Wood Associates has shown that budget chains are taking over shopping malls and leaving the high street. Retailers and shopping centre owners are bending to what the public want, although I don’t know what it says about the public as they seem to want Greggs, Poundland and Peacocks most of all.

Have a lovely Easter!

 Jeremy’s Trade of the Week

This week’s trade of the week is a ‘Participating Forward Plus’. This differs from the usual participating forward in that, for an increased risk, your strike improves from 1.11 to 1.12 against a forward rate of 1.13. The client decided to hedge his next 6 months of exposure via this trade.

The client will benefit in 50% of any upward movement i.e. should GBPEUR be 1.24 on expiry, 12 cents better than the strike rate, the client receives 1.18, 6.00 cents better than the strike rate. Should the GBPEUR rate be below 1.1200 and above 1.0700 on expiry they are able to buy euros at 1.1200, if it is below 1.0700 however, then for every percentage point below 1.0700 they lose the same off their strike of 1.1200

This strategy is premium free and allows a hedge with a nominal WCR of only 1 cent from the quoted forward of 1.13 while a normal participating forward would see a WCR at least another 1 cent lower.  The trade also works without the additional risk but your worst case rate decreases to 1.11 from 1.12.