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Osborne shows promise - could go far...

Not bad, not bad at all for a first emergency budget, and what's more, the financial markets liked it.  Not a prile of threes, but a pair of aces, good enough to win the hand.  As a result, sterling is now at a 19 month high against the euro.  So far, so good.  BUT...    The unfortunate fact is that Euro weakness rather than sterling strength is the driver behind this move.

Moody

No, not the French team, the ratings agency.  There are three (self) important rating agencies; S&P; Moody's and Fitch.  They give banks and countries a rating varying from AAA to CCC.  In theory, an AAA rating means that you are a top class risk, and are certain to repay your debts.  Unfortunately many of the banks that went bust during the credit crunch were AAA rated, but that's a different story.  Anyway, Moody's said yesterday Britain would retain its AAA credit rating if the measures outlined in the budget were implemented. The comments supported the pound and helped push rates higher during the week.

And the Bank

Even the good old B of E chipped in to help.  The minutes of the last meeting were released, and showed that one member of the interest rate committee voted for a rate rise.  So what? I hear you say.  Well it means that the chance of sterling rates going up just got a little bit better, and higher rates usually mean a higher pound.

G20 meeting

Leaders of the richest nations meet today in Canada this weekend. One of the main topics for discussion will be  the problems in the EU, and recovery from the financial crisis. Any announcements could cause volatility in rates. If a clear plan is agreed to assist the EU that the markets buy, the Euro could strengthen and sterling could fall. If however no clear plan is agreed, and investors remain wary of investing in the Eurozone, we could see the Euro continue to remain weak and good buying levels remain.

So what now for the pound?

I think I have a bit more of an idea than I had last week.  I think that these rates are pretty much as high as we are going to see for a while. I think that the Euro might start to recover from its recent upsets, and that won't be good for the pound.  My guess is sub 1.2000 by next weekend.

A bientot,   Rob

Rob Hesketh and France Financial

Rob moved to France in 2003 after working for 30 years in International Banking in the City of London and Brussels.  He joined the Spectrum IFA Group in 2005 and became registered and authorised by the French fiscal authorities in mid 2006.  He is now a partner in Spectrum and looks after client relationships in the South West of France.

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