Monday

The strong stance taken by the new Chancellor in spelling-out the details of £6 billion worth of cuts today may help investor confidence in the Pound which has been gaining on the Euro so far this morning. The announcement is part of the coalition government's attempt to eliminate the bulk of the UK's £156 billion budget deficit over the next five years.

Also today, British Airways’ cabin crew begins its five day strike over jobs, staffing levels pay and benefits; this will be likely to cause more losses for the airline.

There is no economic data out in the UK today so movements are likely to be down to how the budget announcements are received as well as larger market themes.

Tuesday

Yesterday’s deficit cuts did little to ease growing concerns over the state of the Pound. Although the currency eased 0.6% against the dollar on the back of the Chancellors proposed plans, news coming from the Chicago Mercantile Exchange revealed that speculators are placing huge bets against the Pound.

Worries continue to grow over the state of the country’s finances and as suggested, the formation of the new coalition government has done little more than provide us with a couple of weeks of ‘honeymoon period’, which now appears to be over.

The impact of the Eurozone debt crisis appears to have stung the UK as it questions the ability of debt ridden nations to reduce the deficits they quite clearly see themselves in.

As of GMT 1100, the GBP was trading at USD 1.42760 and EUR 1.16870.

Wednesday

The Pound dropped against the Euro overnight but has picked up again so far this morning.

For the first time since the last quarter of 2008, agents have reported a residential rent rise. It has been suggested that landlords are benefiting from increased house sales; this means that the supply of residential lets has decreased, helping landlords increase rental prices and giving a boost to this area of UK economic growth.

Thursday

As UK stocks jumped and US equity futures advanced, the Pound jumped to its highest levels versus the Euro in almost a year. A reduction in the requirement for the Dollar seems to be the most likely cause for this. News coming out of China seems to have contributed to its relative strength against the Dollar.

Whilst March/April CBI data reported steady sales, the uncertainty surrounding the election have caused a severe drop in April/May figures.

The GBP/USD rate as of GMT 1240 was 1.45070 whilst the GBP/EUR rate stood at 1.18270.

Friday

A light day for data has left the market focusing on risk and equity movement, with an eye on Prudential developments. Yesterday’s gains against the USD on the back of the takeover have been sustained and this morning trading levels of 1.4585 hovered at a 2-week high.

Sterling rose to an 11-month high against the Euro yesterday fuelled by persistent structural concerns in the single currency. This morning those gains were pared somewhat, with levels at 1.1761.

British consumer confidence fell for the third month in a row in May, but the market appears to have largely shrugged this off as the pound continues to be supported by the forecast of higher interest rates to come, possibly in the latter part of the year.

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Nigel Hodges www.currencysolutions.com