£ hits new high for the year against the €uro

The CBI (Confederation of British Industry) commented that the recession will be shorter and less severe than previously expected.

The CBI believes that the pace of contraction will moderate by the end of this year and moderate growth will materialise early next year. They also scaled back their forecast for unemployment from 3.2m to 3.03m by the second quarter of 2010.

However it warned that the recovery would be "slow and gradual" and it would take time to judge whether recent good news will turn into sustainable growth in the economy. This echoes the caution noted by Alistair Darling and comments from Bank Of England officials. Sterling continues to hold respectable levels across the markets, and has this morning hit a new 2009 high of 1.18 against the €uro.

The Euro is under pressure this morning against the USD and sterling following an article in the Daily Telegraph reporting of warnings to be released on the credit conditions in Germany. The DIHK survey to be released this week is expected to confirm that credit conditions for large German companies are not easing despite the interest rates being cut to 1%. This will be a definitive blow for the Eurozone as it essentially affirms that the ECB have not done enough in easing credit conditions…this could lead to the ECB embracing further Quantitative Easing measures. The problem for the Eurozone and the euro is that these measures will not commence until July and could see the Eurozone sticking out like a sore thumb as other major economies drive towards receovery- this will naturally be euro negative.

Good news for UK buyers in France, and 1.20 Euros to the £ is perhaps within sight.

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Tel: 00 33 (0)5 49 27 01 22 or Tel: 00 33 (0)8 77 07 58 99 Mob: 00 33 (0)6 62 28 02 25 Author: LaFranglaise at 03:04 Filed Under: