The British pound is coming under pressure again on the currency markets as investors dump the pound in favour of currencies like the Euro and the US Dollar!

Sterling has dropped to the following rates:

One UK Pound will get you just $1.37 in the USA – this is great for the travelling American so they can come to visit our shops like we did when the rate hit over $2 to the Pound!

One UK Pound will get you €1.06 – which is not quite as low as it has been, but it is still very low and will likely give you a par exchange at the airports when you are travelling abroad.

One UK Pound will translate to Australian $2.10 – for those of you that are travelling further afield!

One UK pound gets Japnese Yen 121.77 – Which is not good for Japan exporting cars to the UK and this will put pressure on these car manfacturers!

From a business perspective this is good for companies that export to other countries and especially to the US and Europe, because our goods become so much cheap cheaper (up to 35% cheaper in the USA from the Sterling high last year) to those countries where we export.

However, where companies are heavily dependent upon imports, then where these come from within the Eurozone and from the USA, their costs will have risen sharply and of course could force them to either put up their prices or could force them out of business all together! Where prices are forced up, this could put pressure on inflation within the UK, which is the last thing we need right now!

Major European economies have announced multi-billion euro rescue schemes to shore up their banks.

Germany has approved a package worth up to 500bn euros (£393bn; $683bn), France will spend about 350bn euros and Spain has set aside 100bn euros.

The bulk of this money will be used to guarantee lending between banks – part of a plan agreed to this weekend by the 15 nations that use the euro.

Meanwhile, President George W Bush said nations were taking “decisive action”.

Speaking with Italian prime minister Silvio Berlusconi, he said the US was continuing to work closely with Europe.

The cash injection by France, German and Spain was echoed by similar moves by Austria and Italy.

Austria is to spend up to 85m euros, while the Italian government pledged to inject as much money as needed without giving any figures.

France and Germany will also use the cash to take stakes in ailing banks.

The announcements helped to lift investor confidence, with stock markets rising worldwide.

Two-fold plan

The two-fold plan involves guaranteeing lending between banks and taking stakes in financial institutions – similar to the bank rescue in the UK announced last week.

“This is a massive engagement” French President Nicolas Sarkozy

The US is also getting ready follow in Europe’s footsteps and purchase stakes in financial institutions.

“We are designing a standardised programme to purchase equity in a broad array of financial institutions,” said Neel Kashkari, the treasury official in charge of the US government’s $700bn bail-out package.

Monday’s other key developments included:

– The UK government said it would inject up to £37bn of taxpayers cash into Royal Bank of Scotland, Lloyds TSB and HBOS
– US shares, tracking earlier gains in Europe and Asia, rose strongly in early trading as investors welcomed fresh efforts by global leaders to end the recent financial turmoil
– The world’s major central banks said they would offer financial institutions an unlimited amount of short-term dollar loans to help stem the crisis
– The Icelandic stock exchange said share trading would remain suspended until Tuesday because of continuing “unusual market conditions”.

‘Massive’

French President Nicolas Sarkozy said France would offer up to 40bn euros to provide banks with the financing they needed via a public company in which the state would the only shareholder.

“This is a massive engagement,” he said.

He added that no financial institution would be allowed to collapse.

German Chancellor Angela Merkel said that the measures being taken would only work if they were accompanied by more robust regulation that will curb “market excesses.”

“The package passed by the German government will serve the financial system and ought to serve to protect the citizens and not just serve to protect the banking system,” she said.

Fund

Unlike France, Germany and Britain, Spain’s Prime Minister Jose Luis Rodriguez Zapatero said that Spain did not need to take stakes in any banks because its banks were solvent.

However, last week the Spanish government announced the creation of a 30bn euro fund to buy assets from Spanish banks to help stabilise the lending industry and unfreeze credit.

At present banks are reluctant or unable to loan cash to fellow financial institutions due to fears about whether the money will be paid back.

It is this lending between banks that traditionally lubricates the banking system, freeing up cash for lending to private individuals and other firms.

News reported by The BBC

The 15 economies of the eurozone contracted by 0.2% between April and June, heightening fears that the euro area is sliding towards recession.

The eurozone’s first decline since it was created in 1999 was driven by a slowdown in exports and consumer spending.

The German economy, Europe’s largest, shrank by 0.5% in the second quarter compared with the previous quarter.

And in both France and Italy GDP shrank by 0.3% in the second quarter.

The slowdown was less pronounced in the wider European community of 27 nations including the UK, which contracted by 0.1%.

“The possibility that the European Central Bank is cutting interest rates in 2008 to support the sickening economy is remote” Economist Jörg Radeke

However Estonia, where the economy contracted for the second consecutive quarter, is now considered to be in recession.

Ireland, whose economy contracted in the first quarter of the year, has not yet released its second quarter growth figures.

Compared to the second quarter of 2007, the eurozone economies grew by 1.5% and the 27 European Union countries grew by 1.7%.

The news weakened the euro, which was already well down from its recent highs against the dollar.

But high eurozone inflation, which was unchanged on the month, made it unlikely that the European Central Bank, which raised interest rates last month, will reverse its stance.

‘Deterioration’

The figures reflect the way in which exporters have been affected by the strength of the euro, which makes their products more expensive overseas, and a more general slowdown in global demand.

French finance minister Christine Lagarde, said the decline in the French economy in the second quarter “mostly reflects the deterioration of our international context, which particularly weighed on our exports and which is common to all European countries”.

“The fundamentals of the French economy are healthy,” she added.

Meanwhile a German finance minister said its economy could contract again in the next quarter which would mean Germany was officially in recession.

“At the moment that cannot be ruled out,” said deputy economy minister Walther Otremba.

‘Orders down’

Germany was once seen as the main driver of growth in the eurozone.

Send us your commentsHowever exporting companies, such as Berlin-based manufacturer Witels Albert, are cutting back after seeing orders decline in the last few months, especially from the US.

“There is a slowdown in the industry and one of the main reason is the rise in oil price,” chief executive Horst Schneidersreit, told BBC News.

“We have seen this in our own company. Our orders have slowed down.”

Despite the sharp slowdown in the second quarter in Germany, the government said it still expected GDP growth of 1.7% this year.

Spain was the only one of the major eurozone economies to see its economy expand between April and June. It grew by 0.1% compared with the previous quarter.

Inflation steady

Figures also released on Thursday showed that prices across the euro area rose by 4% in July compared to a year earlier.

The European Central Bank increased interest rates in July by 025% to 4.25% in a bid to combat rising prices.

The July figure is the same as June’s inflation rate, but although the rate of increase is not quickening, economists said rising prices were still a concern.

“Although inflation has been stable at 4.0 % in July, it is still way above target,” said Jörg Radeke from the Centre for Economics and Business Research.

“Hence, the possibility that the European Central Bank is cutting interest rates in 2008 to support the sickening economy is remote.”

News reported by The BBC