Is the recession really over ? Exchange rates still fragile

  • 14 years ago
  • Uncategorized

With the news that the UK finally emerged from the recession this morning after 4th quarter GDP figures from 2009 reported growth, some may be tempted to assume that it’s business as usual for UK plc and that sterling is destined to gain strength. And maybe even that credit is due to the government for providing all the extra cash so banks could stay afloat and provide the financial services that kept the economy on idle throughout the recession.

 

But, and it’s a big but, if you look beneath the surface at the bigger picture, overall it still looks very fragile and uncertain.

 

Firstly, we only just managed to scrape the positive figures required to technically end the recession with a 0.1% growth reading. This is only the preliminary reading; there are 2 more readings to come this quarter on or around the 26th of both February and March. This in turn leaves the door open for a downwards revision of the figures putting us right back in recession for the 7th straight quarter.

 

Secondly, because of the VAT hike on January 1st and the soon-to-end car scrappage scheme, it is very possible that the growth reading is in fact only down to a surprise spike in activity rather than sustained growth as people rush to take advantage.

 

The effect that this has for sending money abroad is that there is still uncertainty for the future of the Pound as the view on the economy remains shaky at best. This means that the chances of sustained Sterling strength are still quite low and if the GDP figures are revised downwards in February or March then they will remain low for quite some time.

 

So although it is good news that the recession is ‘over’ for now, I think we still have a very slow and difficult recovery ahead of us. Securing exchange rates on forward contracts can eliminate the risk of currency fluctuations. Speak to a specialist FSA-regulated currency company to find out more.

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