Weak week for GBP
In an early welcome sign that last week’s budget was well received, thirty nine of the country’s leading venture capitalists signed a letter stating that the new investment rules introduced by the Chancellor mean ‘the UK is being positioned as a world class place to launch a new business’. This endorsement by the very people that the Chancellor is seeking to attract will be music to his ears and help support his claim that ‘Britain was open for business’.
In a further sign that the coalition government are embracing private enterprise, the Prime Minister is launching a new initiative today called “Start Up Britain”. Household names such as Blackberry, Microsoft and Intel have pledged their support for the initiative, which will provide start ups with support such as grants, free advertising and help with premises. What does all this mean? Well as the note has discussed before, with the UK unemployment level at 8% and the public sector going to shrink over the foreseeable future, private enterprise is going to be relied upon to create new jobs. Although there are early positive signs from the recent announcements, it will take time to determine if the coalition’s strategy will in fact get Britain working again.
Across the channel and our European partners are not without their own problems. Portugal has come under renewed pressure to accept a European bailout as it debt costs soar to over 8%. With EU bailout funds available at between 5% and 7% you don’t need to be a mathematical genius to work out that it makes sense, but national pride may be getting in the way of common sense. So for now the Portuguese government is holding the line that it does not need a bailout, but what this space.
Given all the uncertainty with Portugal you would expect the Euro to weaken as we are always told investor don’t like uncertainty, but this has not been the case. The pound is trading at 1.1350 against the euro – the lowest since October 2010. Sterling is also down against the dollar at 1.5971 having been at 1.6400 this time last week it has been a sharp turnaround. The GBP/USD fell below the physiologically important 1.600 level after US GDP figures released on Friday showed the economy had grown at the higher than expected rate of 3.1%.