Banks will weigh down on the Pound ahead of key interest rate decisions on Thursday for both the U.K and Europe
The banks have indeed managed to make front page news over the past couple of days with initially Barclays first to be in trouble however it appears that the majority have been breaking the law, and it also looks like there is every possiblity that we may see this become a criminal case as well as a huge scandal. Bank Of England Governor Mervyn King commented on Friday that “something has gone seriously wrong with the U.K banking industry” which certainly is not what you want to hear when the economy is already in a double dip recession!
Barclays shares dropped by roughly 16% over the course of Friday and with the mention of other banks being involved we could see others follow suit this week, the major issue may be if we see compensation claims much like the PPI claims we have seen over the past few years – These have cost the banks billions and should compensation start to be sought after with this particular issue then how much of a dent is this going to put into some already troubled banks.
This whole subject may start to dent the Pound this week as the media appear to be all over it and if it continues to gather pace over the week then some of the big bonus taking top dogs may start to fall like dominoes… Are you using your bank for your currency transfers? Have you ever considered what may be a much better option in a currency broker? I can get you much better exchange rates than the banks and because this is my specialist subject a much better proactive level of service too. Feel free to contact me directly on djw@currencies.co.uk and I will be happy to add you to my huge list of satisfied clients.
The banking troubles may actually take the focus off of another extremely important data release this week as we have the interest rate decisions both for the U.K and the Eurozone at 12:00 and 12:45 respectively on Thursday. There is the potential of a release of further QE (Quantitative Easing) into the economy which for those of you who are not regular readers has generally led to weakness in the Pound over the past few years, even with the mere mention of QE let alone it being introduced. QE is essentially printing more money in an attempt to boost the economy and get it moving again however it can cause inflation to rise substantially and many other problems.
There has also been a suggestion of an interest rate cut in the U.K too in the coming months (I would be surprised however in this crisis do not rule anything out!). An interest rate cut is generally seen as negative for the currency concerned and a rate hike is seen as positive as it makes the currency more attractive to investors.
The European Central Bank also may look at cutting rates at some point soon to try and assist some of the troubled economies caught up in the European mess so be aware we could see weakness for the Euro should this happen. One of the key factors of the European interest rate decsion on Thursday may be the press conference shortly after it – Super Mario (thats Mario Draghi and not Ballotelli) will give an overview of the EBC plans for the month ahead and any comments will be eagerly watched by investors and may lead to a volatile time for both the Euro and other currencies connected to risk.
Exchange rates move every two seconds and i’m sure many of you have much better things to do than watch rates like a hawk when you have a pending transaction to carry out.
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Exchange rates today have crept up a little and have just
pushed through the 1.24 barrier.
