Asian Voice - Saturday 3rd December 2011
Foreign Exchange Rajesh Agrawal is the Chairman & CEO of RationalFX, Currency Specialists. For any further information call 020 7220 8181 or e-mail firstname.lastname@example.org
Is the UK in Line for a Double Dip Recession? As everyone knows the UK is struggling along with all the major economies around the world. This sovereign crisis has affected the global markets with worse times than the 1930’s recession. There is a big chance that the UK could be in line for a double dip recession in the coming months as predictions of negative growth figure for the next 2 quarters are in the pipeline. The UK economy grew by 0.5% last quarter, which was due to the manufacturing industry that surprisingly had a very good quarter. It is however expected that this will not be the case for the next few quarters. With rising energy, petrol and food prices, consumers are being very cautious about where they are spending their hard earned money. Retailers started reducing prices well before Christmas to boost sales but this also doesn’t seem to be encouraging consumer spending. Recent days have seen big organisations such as Topman and Thomas Cook announcing loses with Thomas Cook luckily managing to secure a last minute deal with Lloyds TSB, its banking partners, which will cover them until April. The UK Chancellor, George Osbourne has already announced a £50billion underwriting on bank lending to help
small medium sized business to drive the economy. This could have a very positive impact for growth but whether the banks are willing to lend in these turbulent times remains to be seen. Mervyn King recently commented that the main reason UK was not doing as well as predicted was due to the European crisis, which are not only affecting the UK but has become a global problem. Until this is resolved, the UK and the world could see major constraints within their economies. In Recent months, the Eurozone have finally had their problems surfaced for everyone to see, which can no longer be kept behind closed doors.
Greece has had major problems along with Italy, Spain, Ireland and Portugal. The only economy managing to keep the Eurozone above water is Germany but they also have had problems by only having 50% of bond auctions being sold with excessive yields. There were rumours last weekend that the IMF had agreed to assist Italy with 600million Euros in funding but this was soon denied on Monday morning that a plan of an austerity measure was not on the books. Although nothing concrete has been set to help recovery, avenues to assist this growing debt are being discussed. On 9th December, French presi-
dent Sakozy and Angela Merkel from Germany are announcing guidelines for a new treaty along with controlling the member states budgets. The ECB are considering following the US by undergoing a Fedstyle QE to support bond yields. The Eurozone had a meeting on Tuesday to release the next tranche of funding for Greece and announced new improved EFSF. The head of the IMF, Christine Lagarde, visited South America to ask them to help with funding the Eurozone out of these difficult times. This all shows that the Eurozone are in major problems but are trying to finally resolve the issues that have been looming for a long time, but the question is, are they too far gone to recover? Will the Eurozone exist in the future? It may be safe to say that the Eurozone still has a very long way to go until any signs of recovery surface. If the Eurozone continue to fall, will UK follow suit and have another long recession in the pipeline? Despite all this bad news, there is a light at the end of this tunnel. Predictions are that the benefits of the austerity measures are expected to surface in 2013 with an expected year growth of 1.8%.
Weekly Currencies As of Tuesday 29th November 2011 @ 1pm GBP - INR = 81.03 USD - INR = 51.95 EUR - INR = 69.17 GBP - USD = 1.56 GBP - EUR = 1.17 EUR - USD = 1.33 GBP - AED = 5.72 GBP - CAD = 1.60 GBP - NZD = 2.05 GBP - AUD = 1.55 GBP - ZAR = 13.06 GBP - HUF = 362.31
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