Looking at the budget in bullet point terms – you would have thought the pound may have lost ground today – Although there are some promising parts believe it or not!
Here are the key points that you need to be aware of:
- Growth forecasts for UK economy cut 0.9% this year and 0.7% next year
- Borrowing forecasts revised up
- £40bn “credit easing” scheme to underwrite bank loans to small firms
- £5bn plan to improve national infrastructure over three years. Further £25bn could be spent in future years
- £1bn scheme to subsidise work placements for the young unemployed
- Mortgage indemnity scheme to help 100,000 people get onto the property ladder
- £500m housebuilding plan in England
- January rise in regulated rail fares to be capped at 6.2%, not 8.2%
- Doubling of free childcare places for deprived two-year-olds to 260,000 in England
- 3p fuel duty rise due in January to be delayed or frozen
- Bank levy to be increased
Without a doubt next year will be tough for the U.K and indeed the world as a whole, the key for Pound strength is Sterling being the best of a bad bunch… You may have thought that would be reasonably easy with the U.S credit rating being downgraded and an increasing amount of problems within Europe that seem to be rising on almost a daily basis as contagion spreads rapidly like a nasty epidemic that nobody in truth really wants to see.
The trouble is, although we aren’t part of the marriage of the Euro Zone, we have been in bed with it so we are just as open to the problems here in U.K and although Euro buyers may be praying for more problems to arise, they actually hinder the Pound as well.
Also, when there are troubles in the Euro Zone the Dollar seems to be gaining as well due to investors looking for a safer haven to avoid risk. (With the USD being a ‘safer haven’ along with gold being priced in Dollars both lead to an increase in demand and therefore price to buy USD) This means that anyone buying Dollars or Euros with the Pound could actually do with the Euro Zone slowly getting out of trouble with the U.K however being leaps and bounds ahead, raising interest rates at a greater pace and finally looking a little like we used to 5 years ago before this mess all came to light.
An interest rate hike generally is seen as positive for the currency concerned and a cut negative, part of the reason we have not gained against the Euro as many would have imagined – The Euro is more attractive to investors because of a higher rate.
Those looking for Australian and New Zealand Dollars or South African Rand, again a risk factor is a big player. The more trouble globally the cheaper these currencies should be to buy, the more solutions that are seemingly working the more attractive the riskier currencies become, especially by means of carry trading – This is where an investor borrows a currency with a low interest rate (JPY,GBP) and moves funds to one with a much higher rate (AUD, NZD, ZAR) making their money on the difference. Clearly the performance of these countries economies will also be key in 2012 so watch this space and keep up to date with our timely, non technical updates that hopefully anyone can understand.
If you have a currency requirement imminently or in the coming months then do feel free to contact me directly firstname.lastname@example.org and I will be confident that you receive a much better rate of exchange than using your bank or another broker by using me, along with the very highest level of customer service throughout your transfer.