The budget statement yesterday was pretty gloomy. With growth forecasts being revised down it looks like the UK is set for continued problems, this is highlighted quite substantially by the strikes today. Over 2m Public Sector workers will go on strike at protests against pension reforms as well as a wider protest at the lack of growth and low prospects for the future.
Amidst the doom and the gloom the pound made some impressive gains yesterday. Against the Euro we climbed close to the 9 month high touched earlier this month. This is because whilst the UK is suffering from low growth, by taking such tough decisions to reduce borrowing over the future, the UK is being seen as a kind of haven amongst countries struggling to cope with debt burdens. Yes the UK is still in trouble but by taking measures to reduce borrowing costs, the UK is setting itself up for the future. The UK now has some of the lowest rates to pay on borrowing it does need to make. Compare this to Germany who recently suffered from a major under subscription in it’s debt offerings.
Despite yesterday’s boost on GBPEUR for reasons I have previously discussed I don’t think the rate will continue to climb. Pressures in the Eurozone are weighing on the UK and as today’s strikes show there is massive discontent in the UK at the direction things are headed. Inflation and Unemployment are up whilst Growth is down. I don’t think the average Public Sector worker or man in the street really cares if UK borrowing is down, they care about things closer to home, things that don’t really seem to resonate with the current government. I think GBPEUR is well worth taking advantage of, at the very least anyone looking to trade should keep a close eye on where this goes as things are just so unpredictable.
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