If the US initiates QE3 how will it affect UK trade?

By Jamie Jemmeson, trader at Global Reach Partners

The UK is a nation of traders, whether it be at the good old east end fruit and veg market, money and stock brokers or importers. As an island the UK has never been shy of international trade. However, as an island with its own currency the UK is vulnerable to movements in global exchange rates.

One of the problems the UK faces is that the US Dollar is king, the world’s reserve currency. In recent times we have seen reserves diversify as the Euro attempted to spoil the Dollar’s share. However, the...

...European debt crisis has really put the cat among the pigeons causing many to question the viability of the single currency.

The net effect of this uncertainty over the Euro zone is that the Dollar continues to firmly hold onto its crown. Not only have reserves been reverted back into US Dollars to some degree, but the currency has also been bought as a safe haven asset. As the world premier trading currency, the movement of the dollar has a large influence on how Sterling and indeed global foreign exchange markets trade. For the UK in particular, the performance of the US Dollar can be crucial to both the import and the export sectors especially as many of the UK’s trading partners’ currencies may share a loose pegging (fixed level of exchange) with the Greenback.

Bad news and uncertainty appear to be on the agenda every week in Europe. However, investor sentiment has weathered the storm and is now more acclimatised to this flow of news and potential negative outcomes have been priced in. Markets are looking for opportunities to buy and there have been some positive signs for investors as German data remain steady. The European... continued on page two >

 

 

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