Currency watch: It takes two to tango

The deterioration in UK economic news has continued through the first week of September with yet more measures showing that there is further down the rabbit hole for the UK to tumble.

However, we have not seen this news reciprocated in the currency markets. Choices in the FX markets can be ‘ugly sister’ choices; none of the options are particularly attractive but you have to take someone dancing at the ball.

So while the UK has becoming increasingly more haggard over the past few months this is still nothing compared to the pantomime hobgoblins representing the US and Europe; the unemployment rate in the UK sits at 7.8% which is positively angelic when compared with the US’s bunion-like 9.7% and EU’s 10% scabby knees.

So while we are looking at poor news here in the UK in coming weeks its impact on the pound may be modest. It takes two to tango, if I may.
 
On another note, two years ago this week Lehman brothers collapsed and the subsequent fall out caused by years of malaise within the banking system is still being felt today.

The pictures of bankers carrying cartons of personal belongings out of offices is an indelible image that is likely to be reciprocated here in the UK throughout the next couple of quarters. It will not be bankers however that feel the pain.

Change Lehman Brothers for regional quangos and you are closer to the mark. How deep the cuts will be are unknown at the moment but the pain will be felt for longer than the two years since Lehman left ‘The Street’.

Jeremy Cook, chief economist at World First, 17.09.2010