Sterling continued on its path of strength early yesterday but is still buffeting very substantial resistance levels in most currency pairs. The Pound’s new found strength is partly due to fairly universal approval of the new government’s aggressive action to reduce Britain’s indebtedness and partly down to the slightly hawkish view espoused by Bank of England committee member, Andrew Sentence when he offered a more detailed explanation of his decision to vote for an interest rate rise at their last monetary policy committee meeting.
The gist of Mr Sentence’s report is that he is concerned that with UK inflation remaining stubbornly above the bank’s target, with the global recession unwinding, with the Pound being oversold and with reasonable domestic growth within the UK, the case for small incremental interest rate hikes was a solid one. He may well be right but whether the rest of the MPC is bold enough to risk the fragile recovery in the pursuit of lower inflation is an entirely different matter. Nevertheless, Euro buyers are seeing the best levels in 19 months, US Dollar buyers are getting their best levels in over two months and the Sterling - NZ Dollar and Sterling - Aussie Dollar exchange rates are back at the top of their ranges. This morning’s release of mortgage and lending data from the Bank of England may directly impact on these levels.
For its part, the Euro remains in the spotlight as the Bank of International Settlements has warned that European banks and some on the other side of the Atlantic are still on life support and have a long way to go before they are stable again. Banks in Europe and the UK are under huge pressure to bolster their balance sheets to ensure they won’t have to call on taxpayers again but that pressure is making it hard for them to set aside enough cash for loans which are essential is the economies of these countries are to grow out of recession. It does seem that taxpayers are guaranteeing the survival of banks which could and perhaps should have failed but the banks are not guaranteeing anyone else’s survival.
The queen is in Canada just days after the visit by the G20 heads and several thousand members of their entourages. All of that ought to bring some overseas earnings into Canada but Canada does really need it. Canada is one of the real success stories of the last two years of economic turmoil but the Canadian Dollar is a tad weaker than it has been of late; a tad more affordable to those who need to buy it and the Sterling - Canadian Dollar exchange rate has only been higher than the current level once since 1st March. More of this below.
In other news, Miss Cornwall has been dethroned after it was revealed that the winner, Laura Anness was too old (27 when the competition is only open to women aged under 24). Personally, I would think well done Laura for looking youthful enough to beat all those youngsters but she broke another rule as well. In a much more heinous crime, Miss Anness flouted the rule that participants should live or work in Cornwall. How dare she; if only it had been something minor; like perhaps she was a man or a lobster in disguise or something. No the brazen woman came from Plymouth a full 3 miles on the wrong side of the Tamar. How could she!
And the England football team are back in Blighty sporting red faces and those grey Marks and Spencer suits; not one of M&S’s better sponsorship deals.