French Economic Growth Downgraded (Tom Holian)

After a fairly quiet few weeks on Sterling Euro exchange rates we could see some early Sterling strength on Monday. France has downgraded its growth forecast for 2013 after initially predicting growth of 0.1%. The French Finance Minister has now suggested the French economy wil shirnk by 0.1% during 2013 but expects grwoth to return to 0.3% during 2014. This could signal some Euro weakness as France is deemed as the second laregst economy in the Eurozone and therefore this is not a good signfor the single currency.

French unemployment currently stands at 11% compared to the UK’s at 7.6%. With Bank of England governor Mark Carney announcing that the MPC is unlikely to change interest rates until unemploymet drops to 7% this could mean that Sterling could gain strength and continue to trade above 1.16 during Monday’;s trading session.

A rise in British exports has helped to lower UK’s trade deficit to its lowest level in almost a year. The announcement had roundded off a week of good fortune for the UK economy and therefore we expect Sterling to begin the week on a positive note. The UK deficit is still very large so although the data was positive it didn’t strengthen Sterling by as much as some may have liked.

Following Mark Carney’s recent forward guidance and the UK Inflation Report the UK published Inflation on August 13th. If inflation rises typically the BoE will increase interest rates but owing to Carney’s decision to keep interest rates on hold for the foreseeable future we could see some difficult decisions around the corner if inflation is higher than expected.

For more information about exchange rates feel free to contact me directly or if you need to buy Euros then email me on Tom Holian [email protected] and I look forwward to hearing from you.

Enjoy the rest of your weekend!

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