Economic recovery starts to improve exchange rates for the Pound

  • 15 years ago
  • Uncategorized
By this time next week (28th) there is a possibility that the UK is technically out of the worst recession in over 50 years. We should know this once the initial Gross Domestic Product figures for the final 3 months of 2009 are released.
I say technically because it takes 2 successive quarters of negative growth to enter a recession but it only takes 1 quarter of positive growth to come out. We would still be at risk of a “double dip recession” should the figures take a turn for the worst in the first quarter of 2010 although I wouldn’t be surprised, should we exit the recession, to see the current government using this as leverage in the upcoming campaign.
“Green shoots of recovery” –is this fact, or well timed media speculation ahead of the election?
The media are very quick to pen the much favoured “Green Shoots” phrase, although I fear that assuming the recovery is well on the way is a risky game. For example, the recent jobless claims figures suggested under headlines such as “Jobless falls stoke recovery hopes” that unemployment had hit its peak and is now starting to drop again. However the figures showed that the number of people claiming benefits dropped BUT the number of people not in work actually increased. Not quite as positive, but good headlines for the spin doctors to utilise none the less.
Also released recently was the public sector borrowing figures which showed the UK fiscal situation continuing to deteriorate and although the figures were less than predicted, they were still record highs for both month and year to date. This is continuing to weigh Sterling down and hamper commercial exchange rates, as the markets are still looking for that all important clarification on how either the current or successive government plans to pay back this enormous debt deficit.
For people looking to send money overseas this creates a conundrum, do you take advantage of the recent run of form from the Pound now? Or do you hold on to see if things get better? Ultimately it is impossible to tell which way things are going to go. However with an upcoming election creating uncertainty over future of the Pound and the UK and if policymakers at the Bank of England are suggesting that it’s too soon to start calling a recovery, then surely it makes more sense to take advantage of current exchange rate highs. Even Mervyn King himself is saying that the “economic and fiscal outlook was too unpredictable” and I would guess that he is probably in one of the best positions to comment on these sorts of things.

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