More Cash for UK Economy?
A government minister has suggested that plans to inject more cash into the economy could happen "quite soon". Treasury Secretary Stephen Timms told the BBC the government and the Bank of England were in talks regarding so-called quantitative easing.
Quantitative easing effectively allows the central bank to write cheques to banks in exchange for assets. The hope is that this would encourage banks to lend to consumers, who would spend more, helping economic recovery.
This method is seen as a way to help the economy, as the benefit from lowering interest rates is seen to be diminishing. As the world economy cools, and access to credit remains expensive or hard to obtain, UK policy makers have been looking of different ways to encourage the banks to lend again.
Earlier this month the central bank opted to lower interest rates to 1% from 1.5%, marking the fifth cut since October. But many analysts say cutting interest rates now will not be enough to get the economy back on track and that the main challenge is how to get banks to lend again.
Quantitative easing was pioneered by Japan as a way of battling its deflationary problems in the 1990s.
The effect on rates? - This illustration shows how much money has already been pumped into the UK and US economy compared to the GDP for each country. As you can see so far huge amounts have been pumped in to the economy, however the problems seem to remain.
Further bail outs and quantitive easing could well be seen as extremely negative for the pound, as the Bank of England fall back on this measure as a last resort, as interest rates approach zero. Sterling Exchnage rates could well be affected negatively, so if you have a requirement, consider acting soon to protect yourself from any decline.
Northern Rock to start lending again
State-owned Northern Rock bank plans to increase its mortgage lending by up to 14 billion pounds over the next two years, a Treasury official said on Sunday.
The plan to get Northern Rock lending again is part of a series of initiatives expected this week designed to get credit in Britain flowing again after the economy shrank by 1.5 percent in the last three months of 2008.
"The government is implementing a new business strategy for Northern Rock that will see it make a significant return to the mortgage market," the official said.
British house prices have slumped by nearly 20 percent in the last year as mortgage lending has all but dried up in the face of a global credit crunch that has put many of the world's major economies into recession.
Northern Rock was nationalised last year, becoming one of the first victims of the credit squeeze, when news that it had to seek emergency funding from the Bank of England triggered Britain's first bank run in more than a century. This was the start of the so called 'Credit Crunch', so could this signal the end?
Most analysts think not. The economy is still in a very poor state, with banks unwilling to lend to each other. Most analysts agree that the economy is unlikely to recover until the end of 2009 at the earliest, with most actually not predicting recovery until well into 2010 and beyond.
When should I buy my currency?
Nobody can predict the markets, and given the current woes facing the UK at the moment, in my view things are likely to continue to get worse before they recover. Therefore if you have a requirmement to purchase foreign currency this year, get in touch today to discuss how to protect yourself against market fluctuations.
This Weeks Data
Every day economic data is released across the globe, that effects exchnage rates. Each day you can see imminent releases in the table on the right. To find out how this might affect you, get in touch today. This weeks data is below:
Monday
UK Nationwide House Prices
Canadian Retail Sales
Tuesday
German Business Climate Data
UK Business Investment
US Fed Chairman speaks
Wednesday
UK and German GDP Data
US Home Sales
Thursday
German Unemployment
EU Consumer and Economic Confidence
US Home Sales and Durable Goods
Friday
UK Consumer Confidence
EU Consumer Price index & Unemployment
US GDP Data
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Labels: EUR, Exchange Rate Forecast, GBP, Sterling Outlook, USD
