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Double Dip Recession Results In Sterling Strength

Double Dip Recession Results In Sterling Strength

Double Dip Recession Results In Sterling Strength

By: Nick Marr -  Category: Spain - Added: 2012-04-29


Overrall, the UK economy shrunk 0.2% in the first three months of 2012. This has come as a surprise for many, as recent decisions by the Bank Of England suggested that they believed the country wasn’t going to slip back into recession. However, those who have been keeping an eye on current exchange rates might be confused as to why this negative UK economic data isn’t proving to be bad for sterling. In fact, it appears to be quite the opposite, with the pound gaining strength against the euro. As well as that, surveys conducted during March show an increase in consumer confidence in Britain.

The Prime Minister has vowed to stick to the Government’s economic plans, a statement that may have gone some way to alleviate fears of the UK economy becoming completely unstable.

More bad news for the Eurozone this week, as Spanish unemployment hit a record high of 24.4%, with 5.64 million Spaniards unemployed. This is especially distressing for Spain, as their unemployment rates now exceed that of Greece. Italian debt auctions were comparatively successful, but not to the extent that the Euro made any major gains. The French general elections may be causing some concern for the markets, as buyers warily await the results. It should be worth nothing that the socialist candidate, Francois Hollande, has set out a plan for growth should he win, which would go hand in hand with German chancellor Angela Merkel’s plans for growth. For the time being, however, the troubles in the Eurozone utterly dwarf the comparatively minor problems in the UK economy. As a result, this week has given us the best rates for transferring sterling to Euros for 20 months. However, as the UK economy is in a precarious position, it is unknown how long these rates will last for, especially as it may lead to more Quantitative Easing from the Bank Of England.

Surprisingly, the both the Euro and Sterling have seen a sudden resurgence against the US dollar this week. In the pound’s case, we are seeing an 8 month high against the US currency, giving us the best rates for money transfers to the USA so far this year. This is mostly owing to US policymakers considering the possibility of further monetary easing, and the chairman of the U.S. Federal Reserve stating that any weakness in the U.S. economy would be met with another round of bond purchases.

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