CELINE ADAMERIC

SPENCER

Project #2: GBP

GBP Activity Since June 1, 2009

GBP Activity Since June 1, 2009

GBP Activity Table

Date Day Rate Daily Percent Change

6/1 Mon 1.645  

6/2 Tue 1.651 0.3891%

6/3 Wed 1.640 -0.6661%

6/4 Thu 1.617 -1.4144%

6/5 Fri 1.601 -0.9709%

6/8 Mon 1.598 -0.2435%

6/9 Tue 1.627 1.8153%

6/10 Wed 1.633 0.4119%

6/11 Thu 1.655 1.3103%

6/12 Fri 1.652 -0.1511%

Evidence of a revival in the real-estate market reinforced speculation that record-low interest rates and stimulus measures are reviving Europe’s second-largest economy after it contracted 1.9 percent in the first quarter, the most since 1979. Bank of England policy makers, who start a two-day meeting tomorrow, may leave the key rate at 0.5 percent and continue a 125 billion- pound ($204 billion) bond-purchase plan to nurture a recovery.

The pound rose to a seven-month high against the dollar as reports on U.K. and U.S. housing fueled optimism that the worst of the recession is over and the supply of credit to British companies deteriorated at a slower pace.

Pound Rises to Seven-Month High on Evidence of Housing RecoveryJune 2

The British pound traded near its lowest level against the dollar in more than a week as Prime Minister Gordon Brown confronted a fresh attempt to oust him following a drubbing for the ruling Labour Party in European Union parliamentary elections. The U.K. currency declined earlier against the euro and yen after former Bank of England policy maker David Blanchflower said the central bank may expand its program of buying assets with newly created money as the economy shrinks. Brown meets with the 350 Labour members of Parliament today. The party finished third in the EU elections with 15.7 percent of the vote, down 7 percentage points from 2004, according to results published today. “The more Brown resists calls to resign, the more this will weigh on the pound,” said Michael Klawitter, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second- largest lender. “He is perceived as no longer being able to handle the economic problems.” The pound was at $1.6031 by 5:30 p.m. in London after dropping to $1.5803 earlier, from $1.5981 at the end of last week. Sterling was little changed at 157.82 yen. It strengthened to 86.75 pence per euro, from 87.40 pence.

Pound Trades Near One-Week Low as Labour Slump Pressures BrownJune 8

“The housing data and the improvement in Gordon Brown’s fortunes for the time being are providing support for the pound,” said Gavin Friend, a markets strategist in London at National Australia Bank. “There’s an appetite for risk out there today.”

U.K. Currency Advances on Signs Housing Market Is ‘Stabilizing’ June 9

The pound appreciated 1.3 percent to $1.6264 by 4:44 p.m. in London, and 0.6 percent to 86.12 pence per euro. It also strengthened 0.3 percent to 158.59 yen.

Brown won the support of most Labour lawmakers by promising to make unspecified changes to his leadership style and agenda, after confronting dissidents at a two-hour closed-door meeting in London late yesterday, according to six who attended.

The British currency also rallied after Prime Minister Gordon Brown fended off calls to resign after winning the support of most of his party colleagues at a meeting on June 8. Brown’s governing Labour Party finished third in EU elections after weeks of newspaper reports detailing excessive expenses claims by lawmakers.

“The U.K. political turmoil will return to haunt the pound,” said Neil Jones, head of hedge fund sales at Mizuho Corporate Bank Ltd. in London. “But for now attention is shifting away from the parliament to the private-sector economy.”

U.K. Pound Gains as Manufacturing Increases, Stocks AdvanceJune 10

The pound dropped the most in three months last week versus its U.S. peer amid a series of cabinet resignations and calls for Brown to step down.

Summary of Trends

Political Turmoil The pound depreciates from June 2nd to June 8th while

Brown is being pressured to leave office The pound starts to appreciate on June 9th when Brown

manages to convince adversaries otherwise

Internal Policies Domestic fiscal policies have allowed the housing

market to improve which supports a stronger economy

Sources

Bloomberg.comFx.sauder.ubc.ca