The pound remains weighed down by poor economic data, the political fallout within the coalition government from last week’s local elections and the resounding ‘No’ vote in the AV referendum and the growing realisation that the Bank of England’s Monetary Policy Committee look set to keep UK interest rates unchanged at the historic 0.5% low level well into 2012 to allow the UK economic recovery to withstand the austerity measures introduced by this government since their election in May 2010.

With the number of ‘growth market’ economies increasing interest rates to combat rising inflationary pressures on the rise (both Russia and India increased rates last week) and the Swiss Franc at or close to 29 year highs due to its safe haven status amongst investors, the pound remains in ‘no man’s land’, neither appealing to those investors seeking higher returns who remain focused on the high yielding currencies like the Australian dollar nor to those risk averse investors who prefer the safe haven status of a currency like the Swiss Franc with its balanced budgets and little to no debt levels.

In a quiet news day for the UK, the Halifax reported that UK house prices fell at their fastest rate in 18 months by 1.4% in April compared with March adding that UK property values were continuing a trend of “modest decline”. Prices fell by 3.7% compared with a year ago and were 1.2% down on the previous quarter with the average home now costing £160,395.

Meanwhile, the British Retail Consortium (BRC) reported that retail sales jumped 5.2% in April thanks to the warm weather and the back-to-back long weekends. This reversed a 3.5% fall reported for March. But the BRC warned that the underlying picture remained one of weak spending and retailers under great pressure.

Regards,

Tom Trevorrow
Account Manager
Tel: +44 (0)1736 335264 | SMS: +44 (0)7781 482507 | Fax: +44 (0)1736 369435
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