Foreign Currency Exchange Report 9 March 2010

Unfortunately for those of you buying currency with the Pound as your base currency, you will have to sit and wait if you want to see the market back up again. With a General Election only weeks away, the indicators are uniformly bleak. The UK is the last economy in the G20 to leave recession and is now witnessing one of the weakest recoveries in the industrialised world. Our budget deficit is the highest of any developed country. One in five of our young people cannot find work. Realism has to remain at the forefront when dealing in one of the most volatile markets in the world. Exchange rates of GBP/EUR at 1.05 and GBP/USD at 1.40 are distinct possibilities and should be at the forefront of your minds over the coming weeks and months.

Sterling

The latest election polls from the UK in The Times suggest that the Conservatives will have difficulty in winning a clear overall majority. The Pound exchange rate has become quite sensitive to suggestions of a hung parliament. UK RICS house price balance for February came in at 17, demonstrably lower than the median forecast of 30 and the lowest reading since August 2009. Has the house price rally seen in 2009 hit the buffers? Finally Moody's has warned that the wind-down of UK banking bailout programmes could result in rating downgrades for some UK banks.

Euro

The Euro exchange rate has begun to rally with moves to forge a European-style monetary fund potentially helping to overcome the considerable obstacles that have emerged in dealing with Greece's battle to lay aside its current financial crisis. Analysts say that Europe took another step towards setting up a body along the lines of the Washington-based International Monetary Fund on the weekend when Germany and France gave their support to its creation. Indeed, apart from mounting financial rescue operations for nations, forging a new monetary fund would also help to deepen the European integration process, while also strengthening European Union's fiscal underpinnings.

US Dollar

The main focus for the US Dollar was on US Treasuries which fell as investors prepared to absorb $74 billion in debt scheduled to be auctioned this week and, after Friday's better-than-expected jobs report encouraged hopes for an economic recovery and curbed a safe-haven bid.

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