Welcome to our account of movement in the foreign exchange rates overnight, as well as our look ahead.
1. The pound has taken a cent from the euro and US dollar overnight, as economic research group NIESR predicts the UK has exited recession, expanding 0.1% in the three months to June.
How trustworthy is this?
It’s worth paying attention to. NIESR (or the National Institute of Economic and Social Research) is a respected institution, totally independent from government. Its estimates have long been used to provide insight into the health of the economy. In that sense, it’s likely the know what they’re talking about.
On the other hand, even if NIESR is right, 0.1% growth is still negligible. Indeed, the group’s own release states that, though the UK might have left technical recession, it remains in depression, and will continue to stagnate going ahead. In that sense, though the release is positive, the UK leaving recession is almost just a technicality.
So why has the pound gained?
Because even if the UK leaving recession is just a technicality, it of course is still good news, and that’s something of precious short supply in the world economy right now. Hence, the markets took the report from NIESR as a chance to jump on the pound, in the absence of anything more encouraging.
2. Elsewhere, the euro is still under immense pressure today, as Fitch downgrades 18 Spanish banks, citing that the recent bailout has exacerbated Spain’s debt problems.
I thought the bailout was meant to help?
It has, in the sense that the €100 billion loan has removed the immediate threat of Spain’s banks failing. Yet this is just a loan, and so adds to Spain already crippling debt concerns. If Spain was having trouble meeting its debts before, then this EU bailout has done nothing to alleviate that. Hence, Fitch downgrading the banks, and markets’ continued concern about Spain’s outlook.
Is there anything else I should know?
It looks as though Cyprus will request EU aid inside the next fortnight, as both its government and banks face the threat of bankruptcy. This is due to Cyprus’ exposure to Greece, which of course has been highly unstable in the last 18 months, as well as its own profligacy. Of course, Cyprus is tiny, so that this is unlikely to stretch Europe’s resources, but it sends yet another signal of the problems the continent faces.
Get in touch
I do hope this post has been useful. I will return with my next update tomorrow.
If you have any questions about the foreign exchange rate or transferring money abroad in the meantime, don’t hesitate to leave a reply in the box below. I’d be delighted to provide an in-depth personal answer to your enquiry, free of charge.