This week sees the emergency budget fall upon us in the UK on Tuesday 22nd June. How will this affect the Pound? The emergency budget has been lurking on the horizon for some time now but as the crucial date has drawn nearer the new Government have began preparing the nation by drip feeding indications of what is to come. The Coalition began by accusing the previous Government of leaving finances in a much worse state than feared. Next, the newly created Office for Budget Responsibility last week slashed previous predictions on UK growth forecasts by half a point meaning the new Chancellor has an extra £12 billion to source, with £2.4 billion needing to be raised next year. Yesterday, the Chancellor spoke again ahead of the budget warning that UK citizens from all walks of life will have their part to play in tackling the crisis. This all adds up to paint a bleak picture of the tax rises and spending cuts that are about to be implemented.

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For the Pound therefore, there is likely to be some movement in reaction to the budget. Although long-term investors react well to decisive leadership and strong measures being taken to reduce deficits, historically budgets have tended to weaken the Pound in the short term. In this particular case, the budget will be revealing the UK’s debt woes - warts and all - thereby drawing attention to the problems that the budget is designed to help remedy. As market volatility is expected, if you have any transfers to make involving Sterling, it is advisable to speak with us today prior to the budget.

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Also set to affect a range of currencies this week is an expected overhaul of China’s currency policy which came to light last night. This has caused the US Dollar to fall to a four week low against the Euro, as well as the Yuan to advance the most in twenty months against the US Dollar. China has kept the Yuan pegged to the US Dollar since the onset of the economic crisis in July 2008. This has been much debated and unpopular with other nations as it works to protect Chinese exporters and makes its harder for other nations to compete with the cheap Chinese export market and reduce their trade deficits. Apart from the mentioned movements in the Yuan and the US Dollar, commodity currencies such as the New Zealand and Australian Dollars have strengthened in response to the announcement.

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In European matters, the Euro has been having a volatility time. Greece’s credit rating was downgraded last week to Ba1, a non-investment grade by Moody’s Investors. This is due to their perception of ‘substantial’ risks to the nation’s economic growth. For the Euro-zone however, this was balanced out when the Euro received a boost with more positive news later in the week as Spain manage to sell 3.5 billion Euros worth of bonds raising confidence that nations can raise finances to tackle their debt. With the Pound and Dollar likely to be experiencing movement, the Euro is also looking to have an equally volatile time.

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To discuss how to get the best rates or protect yourself from volatility speak to Nigel Hodges on 0207 740 0000 or fill out your enquiry by clicking HERE.