The two weeks leading up to 11 November has seen some interesting swings in exchange rates for the pound against the euro. We have seen a low of 1.118 to a high of 1.1755, a rise of almost 6 cents. Explaining this movement becomes even more confusing as it was certainly unexpected.

Is the UK economy now well on its way to a full recovery?

Is the eurozone experiencing togher times?

Has the US dollar had an impact?

Well the answer to the last question is a yes. There is an old quote from John Connally ex US Treasury Secretary who was also unfortuntely the Governor of Texas and was in the car when President J F Kennedy was shot. He said “ The dollar is our currency but your problem”. How right he was as the difficulties encountered in the USA have a definite impact for the rest of us.

With the current difficulties of again trying to kick start their economy, the Federal Reserve have decided upon a further round of Quantative Easing agreeing to a $600 billion injection over the coming months. The impact should be a cheapening of the dollar which should in turn, promote invesstment, jobs and fend off deflation.

For the Central Banks of the world that hold about $5 trillion worth of US debt in their reserves the statement about the dollar being somebody else’s problem certainly rings true.

Within the eurozone we have also seen some conflicting information notably consumer spending figures in Germany and France. In Germany, consumer spending was quite flat whilst in France consumer spending was bubbly. At a time when the country was being crippled with a variety of strike action it seems very odd, then again maybe when on strike everybody was shopping!!

Again within the Eurozone you have Germany where employment opportunities seem to be improving whilst across the rest of europe unemployment is on the increase. All this continues to promote the argument that each country needs to be able to manage its own currency and speculation that the euro will fall apart. I personally cannot see this happening so don’t panic just yet .

Looking within the UK we see continued discussions that house prices are due for a further fall and this was supported by the release of the the number of monthly mortgages approved recently which stood at around 32,000. To sustain an interest in the market requires about 48,000 approvals per month.  Will this happen in the short term whilst fears of increasing unemployment remaining a big question?

Good news however to come out of the UK was from the construction sector where the approved civil engineering projects held their own and kept this sector together.

To help strenghen the pound The Bank of Englands Quarterly Inflation Report, as the market was relieved to read, that the November report indicates “inflation is likely to stay above the 2% target throughout 2011 and that the Banks assumption that the stock of purchased assets financed by issuance of central bank reserves remains at £200 biilion which means that a further round of quantative easing is out of the question.

Lots of information to digest and to find out what the future and your pound is going to be worth, get in touch with us at Moneycorp and see how they can make your money go further.