Foreign Currency Exchange Report 30 June 2009

Sterling

Restoring the flow of bank lending to businesses and consumers is seen as an urgent priority to combat the recession. Boosting the flow of lending is essential to reviving growth in the economy as credit conditions remain extremely tight and continue to have a huge negative impact on the Pound exchange rate. British banks haven't increased their lending significantly in recent months, despite injections of capital from the government and £125 billion in fresh money from the Bank of England. Yesterday's reports hinted that the Government may be forced to resort to extreme lending measures to better the economy and overhaul the banking industry. There is a belief that the UK's recession might end this year, but reports suggest that Britain will suffer a bout of stagnation, with zero growth, rather than enjoy the renewed expansion in 2010. With the future outlook seeming uncertain, it would be wise to look at exchanging your currency sooner rather than later.

Euro

The Euro exchange rate showed high volatility to start off the week after initial weakness against a strengthening US Dollar. An improvement in Euro-zone economic confidence figures has seen it the highest since November and led to a brief increase in the Euro exchange rate against most major currencies. There was an increase in optimism in the Euro which is starting to translate into greater domestic demand, evidenced by the increase in June's domestic retail figures. There have also been signs that the European economy is improving but will it be enough to keep the European Central Bank on hold at this week's policy meeting we will have to wait and see.

US Dollar

US markets finished the day with moderate gains. The Dollar exchange rate fell against European currencies but strengthened against the Yen. Experts are predicting that the Dollar currency will strengthen as much as 17 percent against the Euro in the second half of 2009 as the U.S. recovers from the recession faster than Europe. Pro-Dollar predictions reflect signs that the U.S. economy is emerging from the worst turmoil since World War II. Economists are predicting the U.S. economy will grow on average 1.9 percent next year after shrinking 2.7 percent so far in 2009. These positive signs for the US Economy will encourage confidence and lead to a stronger Dollar exchange rate.

Other news

Today sees unemployment rate figures being released for Germany, considered one of Europe's major economies. A decrease in these figures will have a positive influence on the European currency whereas an increase will result in a negative effect.

Please contact Foreign Currency Exchange on +44 (0) 20 7989 0000 to discuss your currency exchange requirements.