The ongoing European economic crisis has forced many people to take a closer look at the British Pound (GBP). Here are some important points about the British Pound that will help you when considering what currency to invest in.
The latest British inflation report has seen a considerable fall in the level of food and fuel inflation. Prices have risen slightly, but this is only the second biggest increase for the year. The market took much longer to react to this news, with the first significant reaction to come at the start of the trading day.
An accompanying note on the European problem was welcomed by the pound. Although the note did not offer much help in terms of how to get out of the current crisis, it did offer some additional stimulus for the UK economy. By taking a further emergency package to the British Parliament to secure credit and investment support, it has placed greater reliance on the European Union and also increased the chances of the Euro strengthening against the Pound. More of the same could see the British Pound strengthen and help the country get back on track in the near future.
The renewed demand for more debt from the Eurozone means that it is likely that the need for a bailout plan will be harder to come by as time passes. However, in terms of outside interference, the market may still be reluctant to tighten its purse strings. It is believed that the trend in the Euro will not continue, meaning that the market will remain more than capable of accommodating additional debt.
The recent past has seen the British Pound go through some significant fluctuations in value. This is due to the fact that the economy is weak and the retail sector is low. Those in the retail sector have seen an increase in prices for goods and services, which have meant that they have taken a significant loss on the Euro.
Many of the consumers who lost out during the financial crisis, such as business and financial owners, have regained some control over their finances, with strong economic growth and low inflation expected. As a result, the market is likely to remain somewhat cautious. The last thing the market wants is to be hit again by the crisis.
However, there are ways that consumers can regain some control of their finances. One way is to shift some of their money abroad, into sterling. Many companies around the world are now able to issue Eurobonds, which offer a chance for UK investors to make a return on their money in the current situation.
Sterling bonds are essentially a plan for the investor to sell his/her investment in order to take on debt. By selling their bonds they are able to reduce their risk by a significant amount. Whilst it is possible to lose money on these bonds, the returns are often substantial enough to outweigh the risk involved.
It is worth remembering that the Euro will become weaker against the Pound if it becomes clear that there is no immediate improvement in the situation. The strong recovery in the UK, along with some positive reports about the Euro, might encourage investors to take another look at their investments in UK Government bonds. This is something that should be considered and acted upon at the earliest opportunity.
The retail sector is also likely to benefit from the money saved. Retailers have seen a rise in their bills and have been forced to cut costs wherever possible. This could help to lift the Pound, which should allow those retailers to recover from their recent losses and continue to expand their businesses.
Overall, the market remains calm following the surprise announcement. Although the news was welcomed by the market, it is unlikely to have any major impact on the Pound at this stage.
By doing the homework it is easier to ensure that you make the best investment when choosing a currency to invest in. Use the latest information to decide which currency to choose, and trade in your chosen currency when the opportunity arises.