January has been an interesting month for the UK economy. The first few weeks reported:

• better than expected year-on-year sales growth to December (6%)



• positive unemployment data



• a key member of the Bank of England stating that the Bank would look to raise interest rates earlier than initially expected as the UK was well on the way to recovery

The shift from a very negative outlook for the UK was clear as data continued to come in better than expected. A relatively large jump in inflation cemented this and when data demonstrated that prices had risen by 2.9% over the last year, sterling strengthened to hit 5 month highs against the euro and rebounding to early December highs against the US dollar. This was supported further when the Bank of England put on hold their programme of pumping money into the UK economy (quantative easing).

But just when we thought there was a light at the end of the tunnel…we turn to face more darkness. Sadly – all the good news and positive feelings came to a halt when the UK’s GDP growth of 0.1% for the fourth quarter of 2009 was announced.

Let’s look more specifically now at the euro: One of the major issues over the last few weeks has been the crisis in Greece and the other so called ‘Club Med’ countries of Spain and Portugal. Theses countries have come under severe pressure from investors and the markets to bring borrowing down and cut their respective deficits. With the prospect of no external help (until very recent rumours have started to spread) the euro has suffered and risk aversion has returned to the markets with many investors moving their funds to safe haven currencies such as the US dollar and Japanese yen. What’s this mean for you – keep reading…

Whilst the euro zone problems have helped keep sterling and the UK as a relatively more attractive investment against the euro (and subsequently maintain prices in the €1.13-1.14/£1 region), a side effect of those issues is increased risk aversion that has seen investors flock to the US dollar from sterling and causing the price to head towards US$1.50£1. So far this year, analysts expectations of €1.15 – 1.20/£1 for sterling are still on track, as are the expectations of US$1.50 – 1.55/£1. But like last year, the possibility that the exact opposite happens is quite high because as can be seen from the disappointing fourth quarter UK growth figures, the path to recovery here in the UK is going to be long and hard.

Time to buy, sell or hold tight on euros/ US dollars?
So – what should you do if you need to make a euro payment? If you are willing to take risks, you may be able to afford to hold off a little on euro payments and see how things pan out in Greece as the UK is much closer to raising interest rates than the Euro zone (which would see sterling strengthen).

However, with US dollar payments the sensible approach seems to be to take advantage of anything at the top end of the US$1.50/£1’s, as the US recovery storms ahead and risk appetite/ aversion comes and goes, and the market expects sterling to weaken off against the US dollar.

Do you need a live quote or more information on just how much Smart Currency can save your organisation? Call 0845 638 0571 or visit: http://www.smartcurrencybusiness.com/ now.

Feedback from Smart Business Clients
Excellent service was provided from day one from Smart Currency. The initial response to my enquiry was prompt, personalised and informative. Whilst I appreciate that Smart Currency have many business clients, I was certainly made to feel like their only one! An excellent, professional and personal service to be highly recommended.
NA

Your service has been excellent and we will certainly make our future international payments through your Company. Having never made payments with a currency specialist rather than our bank, we were a little nervous however, you always give us a competitive rate which on the amounts transferred has been quite a saving on the High Street Bank. Thank you.
KB

For more information on how Smart can help your business, call 0845 638 0571 or visit: http://www.smartcurrencybusiness.com/ now.

Jargon Buster: Volatility
The tendency of the price of a currency to move up and down by large amounts relative to other currencies. High volatility in the price of a currency means higher risk that the party making payments will lose large amounts as the exchange rate/price will have a tendency to make very quickly. E.g. John hated the current US dollar volatility as it meant he might not be able to afford his house in the USA.

Do you need a live quote or more information on just how much Smart Currency can save your organisation? Call 0845 638 0571 or visit: http://www.smartcurrencybusiness.com/ now.