UK Recovery Stalled
Concerns about the pace of recovery in the UK have pressured the pound in recent trading sessions. Bank of England policy maker Andrew Sentence said that the UK may return to recession conditions prompting speculation that BOE rates will remain at record lows. Sentence told reporters that there is “some risk of a double-dip recession” and that the UK will need “substantial” tightening. BOE policy makers left rates at 0.5% and voted to keep the central banks’ bond purchase program at 200 billion pounds. ($303 billion USD) Neil Jones of Mizuho Corporate Bank Ltd stated, “Sentance’s comments are going to be a driver. They are a reminder to foreign-exchange markets that it’s not going to be a smooth ride to recovery for the U.K. The BOE remains on the dovish side and there’s no risk of them raising rates. That should keep sterling on the backburner.” On Friday the pound fell 1.5% vs. the US dollar and traded at $1.5023. The pound fell 0.9% against the euro trading at 90.04 pence. According to Bloomberg the pound is the worst performer of the most traded currencies and has lost 7.1% so far this year.
UK Recovery Lags Behind Euro Zone
The UK economy expanded by 0.3% during the last three months of 2009 and in the UK recovery from the global recession has lagged behind the Euro Zone and the US. Last week’s data points to a stalled recovery in the UK. Mortgages approved by the nation’s largest banks fell to a nine month low in February. Other stat showed that the number of workers receiving unemployment benefits fell in February. Many investors remain wary of the pound due to the UK’s large trade deficit. Jim Rogers, chairman Rogers Holdings and co founder of the Quantum Fund stated, “Things are pretty bad for sterling for the long, long, long term. I cannot imagine buying sterling back unless it gets really cheap.”
India Raises Rates
The US dollar and the yen gained Friday after India raised interest rates and the Dow Jones Industrial Average fell dimming demand for riskier assets and currencies. The troubled euro posted its largest weekly decline against the dollar as the euro zone remains without any agreement on how to aid Greece. Greek Prime Minister George Papandreou indicated his government may turn to the International Monetary Fund for help if the EU does not establish a lending mechanism at the upcoming EU summit on March 25th and 26th. Many believe that if Greece turns to the IMF the credibility of the euro will be threatened.
Quick Forex Tip: A great deal of education is required for success in foreign currency trading. There are several excellent training programs available online. Many of these free courses are written by highly successful forex traders and can provide the novice with invaluable information. Additionally, many forex trading firms offer demo accounts where newbies can trade in real time and use varied amounts of leverage. Demo accounts can help new investors to get the ‘feel’ of foreign currency trading markets.
