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Thursday, 16 September 2010 10:04

False Rebound

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Against all expectations the Q2 GDP figures for the UK economy demonstrated a growth of a remarkable 1.1%, one of the highest figures found anywhere amongst the emerging economies. Whilst political parties on both sides of the House debated as to who should receive the credit for such a boost, the real results were being felt across the markets.

As the figures were released, unsurprisingly, sterling took a bounce against both the dollar and the euro. This hike wasn’t solely the result of the good GDP figures for the UK, but also on the back of fears that the stress-testing of euro banks would reveal that some banks weren’t quite up to scratch. These fears were later born out, and sterling looks set to rise further across the coming week.

Economic experts in the UK predicted rather gloomily that the 1.1% growth would be as a good as it gets, pointing to the growth provided by the building and construction sector as a one-off due to catching up on the backlog left behind after the particularly bad weather of the winter.

There is, however, another problem in the long run for the UK economy and that’s the fact that as long as it continues to perform well (or, more accurately, outperform the eurozone) sterling growing stronger is not actually going to be that much of an assistance to the recovery. The UK’s largest trading partner by far is Europe, and the government really needs a weaker pound against the euro to bring in extra trade to the UK and further drive the recovery.

Of course, on current evidence, that simply isn’t going to happen, or not for any time soon, leaving the UK without a major region to export to (a problem that isn’t unique to Britain by any stretch) and relying, to a certain extent, on exports to continue the boost in the economy. Whilst the services sector may continue to perform strongly, there are other places in the world to do business and that business is likely to gravitate away from the UK if it’s much cheaper to do it somewhere else.

So, sterling finds itself in between a rock and a hard place and some people are arguing that it would have been better to join the euro and be in the position of Germany, for example, which has seen exports within Europe increase rapidly over the last decade. Of course, a German bank failed the stress-tests as well, so there are further problems to be dealt with in the eurozone.

It is not an overstatement to say that the strength of sterling will dictate the strength and the extent of the recovery in the UK economy. Regardless of how you trade in the markets, whether it’s directly or through a spread betting company like CMC Markets, make sure you keep an eye on the comparative strength of sterling against the other major currencies, it is guaranteed to have an impact on your markets.

Last modified on Thursday, 16 September 2010 10:53

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Interview with Matthew Sheppard

Senior Forex Advisor at XForex


1. What is your name and position?

Hello, my name is Matthew Sheppard and I am a senior forex advisor at XForex.

2. What is your experience and professional background?

In the last 6 years I had filled several positions in financial institutions such as a stock broker, a foreign exchange desk manager, a financial consultant and in my recent role I serve as a senior Forex advisor for XForex which is an online forex company.

3. What type of clients you deal with?

We deal with clients on all levels from the beginning stages to the more advanced trading levels.

4. Does most of your business activity come from the online or offline world?

Because of our high presence on the web, most of our business comes from the online world.

5. Why should a trader pick XForex from all forex brokers?

Aside from all the benefits that XForex offer like commission-free trading, 24/7 online support, high leverage (200:1), XForex offers educational and learning trading experience that you won’t find anywhere else..

Our team of experts and financial trainers provide personal assistance and guide clients to financial success. We provide daily analysis and market reviews to our clients giving them a better understanding of the market and helping them trade profitably.

6. From your experience, what advice would you give a person who wants to enter the forex world?

My advice to the beginning trader entering the Forex world is as follows:
  • Learn the market and understand what you’re getting into.
  • Research and find the broker that suits your needs and wants. Look for a good offering but more importantly customer service, don’t go for the low rates offer without being certain they have a good customer service department. From my extensive experience in the Forex world your key to success will be your client-broker relationship. I can honestly say that at XForex they put an emphasis on servicing clients, which is so important.
  • Invest smartly and calculate your risks.
  • Always know when to get out of a trade.

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