For UK residents in Lanzarote, and for the recovery in the tourist industry on the island after last year’s falls, the prospects for Sterling in 2010 will be very important indeed.

We have come across a very good research document published by Hargreaves Lansdown, the UK investment and pension specialists.  Amongst other things, it suggests that the sharp fall in the exchange rate since the end of 2008 may have been overdone as a response to the very high levels of debt that followed the bail out of the banks.  

The outcome of the general election (by June), and the reductions in public spending that will inevitably follow, (probably regardless of who wins), should end the current uncertainty, reassure money markets, and may well improve Sterling's position against the Euro.  On the other hand, reduced spending and higher taxes will mean less money in people’s pockets for spending, which will not help the economy or the tourism market.

You can get a free copy of the Hargreaves Lansdown Sterling Review and Outlook as a download from their website.