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World First Morning Update Retail Sale Surge boosts GBP " Positive data suggests UK recovery strong " Germany economic growth set to hit 3% " US jobless claims hit new low " EUR9bn released in Greek bail-out plan All this and more is available on our blog. Click here http://www.worldfirst.com/blog The big news of yesterday was the UK retail sales surge at about three times faster than was expected in July at 1.1%. This was well above the predictions which were aiming at a 0.4% rise. There was also a rise in corporate tax receipts which cut borrowing sharply, as well as better-than-expected factory orders. All this suggests that the UK recovery remains strong and also saw sterling jump a full percent against dollar and half a cent against euro. Germany economic growth is set to hit 3% as Central Bank revised their 2010 forecasts, apparently Europe's largest economy is generating its own momentum and they are hoping for ripple effects across other eurozone countries. The EU has said that the measures the Greek government have taken to reduce their budget deficit 'appear sufficient' to meet this year's goal. This is apparently based on the provision that government-spending remains tight. However they have also released part of the second bail-out amount of EUR9bn worth of eurozone loans. Bank of Scotland announced that they are to quit Ireland and should be out by December, this decision was made after Lloyds announced 90% of the Irish commercial property loan book was now impaired. Yesterday was a tough day for US data with jobless claims reaching the half a million point, which is a nine month high and an increase of 12,000. Analysts were expecting a dip with these results and so were surprised. More negative news came out later in the day with the Fed Reserve Bank of Philadelphia showed a further surprise decline in manufacturing in that area, with orders, shipments and employment weakening. US stocks fell to their lowest in almost a month yesterday on the back of this data, as it highlighted the concerns over the economy being stuck in a ditch. The general market attitude is fairly bearish thanks to the last month and a half of negative data. After the excitement of yesterday there is absolutely nothing happening today of any note release wise, so you can focus on your weekend! Hey, Big Spender, Spend... A Little More All this and more is available on our blog at http://www.worldfirst.com/blog. "Economy is a way of spending money without getting any pleasure out of it" Armand Salacrou Click here for the weekly run down video! On Tuesday last week Retail Sales were released and they showed a sharp slowing of growth throughout July, this was due to fears over government spending cuts which in turn knocked consumer confidence. The British Retail Consortium said that like-for-like sales rose 0.5% compared with July 2009 but that this was down from June's growth at 1.2%. Apparently consumers are shunning high-value items, with television sales being hit in particular as well as internet and telephone sales being at their weakest for a year. Food sales have picked up and I blame comfort-eating, but according to the BRC it has more to do with spending being concentrated on essential items. The spending cuts which are so unsettling the 'shop till you drop' attitude is still at the forefront of the coalition's issues. Cameron stated that the goal to shrink the peacetime deficit from 11% to nothing within 5 years is 'the most urgent task'. However, as we have gathered it will not be as easy as it seems, with minsters trying desperately to cut spending by 40% on Treasury orders. The current spending review will be revealed on the 20th of October and many are sceptic as they believe cuts will be made on what is easier for politicians rather than best for the social and economic goals. Rightmove's housing price survey was released this morning showing that prices fell by the largest amount since December. According to the property website asking prices for homes in England and Wales fell by 1.7% in August due to an oversupply of property coming at the same time as Britons desert the country in pursuit of warmer climates. Prices were 4.3% higher than a year ago, above July's 3.7% annual growth rate but below the 5.0% seen in June. UK gilts rose today knocking two year note yields to the lowest they have been since March 2009 thanks to declining stock markets and hints that the global economy is flailing, boosting demand for the comparative safety of government securities. More stress is likely to be piled on tomorrow when CPI is released and expected to show - again - growth slowing in July. Have a wonderful week! Jeremy's Trade of the Week This week's trade of the week is a 50% participating but differs in that, for an increased risk , you benefit from a higher worst case rate (WCR). The client sells GBP and buys EUR to pay suppliers in Holland. The client was able to achieve a worst case rate of 1.19 on their option and they benefit in 50% of any upward movement i.e. on expiry should GBP/EUR spot be trading 6 cents above worst case rate, the client would benefit by 3 cents and receive 1.22. Should the GBPEUR rate be below 1.19 and above 1.10 on expiry they are able to buy euros at 1.19, if it is below 1.10 however then for every percentage point below 1.10 they lose the same off their WCR of 1.19 This strategy is premium free and allows a hedge with a nominal WCR of only 3 cents from current market price while a normal participating forward would see a WCR at least 2 further cents lower. It is also relevant for buyers of sterling and sellers of other currencies. As there is a potential further weakening for sterling in the future, it provides a balanced upside for this potential, while guaranteeing a tight worst case rate.

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