The currency blog

UK attention is very much centred on Wednesday’s budget statement from Alistair Darling - very likely to be his last even if the Labour government are somehow returned to power. The press is full of helpful advice for the Chancellor, mostly telling him what NOT to do, and there is so much of this that the statement itself might well set a record for brevity. He is assumed to have the ‘good news’ to tell of a reduction in estimates for the UK’s borrowing requirement for this year and the next few years to come and will probably upgrade his growth estimates on the back of last quarter’s GDP figure and the predicted estimate for this quarter’s number. Could be Sterling positive in the short spell on or around delivery but the cloudy outlook for the whole political situation at present is more likely to leave investors wary and hence leave the currency vulnerable.

Today sees the opening of the 4 day meeting of the European Parliament’s Committee on Economic and Monetary Affairs, primarily to discuss the Greek economy, the effect the current crisis is having upon the wider Eurozone region and possible solutions to solve said problems. This might very well include further discussions on the establishing of an IMF-like European Monetary Fund. It all sounds very positive but ….. already this morning, Chancellor Angela Merkel has cemented the German opposition to Eurozone originated financial assistance for the Greeks by stating that investors should not expect this week’s EU summit to agree on any aid package for Greece. She added that EU leaders must not create “illusions” for markets by building expectations for Greek aid. Looks like being another tough week for Euro bulls…the Euro is currently testing the downside at 1.35 against the USD.

Sterling has started the week on a bearish note and will hope to get back above the 1.50 level against the USD and hold above 1.10 against the Euro. Mervyn King is speaking today and this normally equates to a weaker pound. We also have Trichet speaking for the ECB and Lockhart from the US Fed

Discuss on this on the Currency Exchange Forum