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oh DOOMed: Sterling - fears increase as economic woes deepen

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    oh DOOMed: Sterling - fears increase as economic woes deepen

    Sterling: fears increase as economic woes deepen
    The pound could fall further this week on the back of a raft of gloomy data – as analysts warn that sterling's weakness could develop into a full-blown crisis.

    By Angela Monaghan
    Last Updated: 6:18AM GMT 15 Dec 2008

    The pound is heading closer to parity against the euro, after closing at just €1.11 on Friday – the lowest it has been since the single currency was launched in 1999 and 17pc down on the beginning of the year when it was worth €1.34. It also fell to a record low against a basket of currencies.

    Steve Barrow, currency strategist at Standard Bank said he was "fearful" for the pound which he believes could fall to parity against the euro in 2009.

    If the pound weakens dramatically it could limit the ability of the Bank of England's Monetary Policy Committee to cut interest rates and push up the cost of imports.

    Mr Barrow said that in the longer term the euro – rather than the pound – could face pressure because a deep recession in the Eurozone is likely to cause "considerable political friction" between its 15 members. (AtW's comment: Mr Barrow reminds me Hitler in his bunker saying how allies would be split due to different political views so their breakdown is imminent...)

    However, in the shorter term UK data out this week including unemployment and retail sales figures are likely to add to the deteriorating economic picture and could put further pressure on the pound. Unemployment figures on Wednesday are expected to show that numbers rose sharply again in October.

    Figures published by the Office for National Statistics tomorrow are also expected to show that consumer price inflation fell sharply in November to below 4pc, after the Consumer Prices Index fell to 4.5pc in October from a peak of 5.2pc in September. The retreat of inflationary pressures will give the MPC more room to cut interest rates. That expectation could also cause the pound to weaken.

    The Bank of England Governor Mervyn King is expected to be forced to write another letter to the Chancellor this week explaining why inflation is more than 1pc above the over the 2pc target. (AtW's comment: maybe BoE Governor should get 20 lashes in front of the building and TV cameras instead of having to write this letter.)

    The market will be looking for further guidance on the future path of interest rates when the minutes from the latest MPC meeting are published on Wednesday.

    The pound's weakness was at the centre of a political spat yesterday, after the Chief Secretary to the Treasury Yvette Cooper said that the Government would not provide a "running commentary" on sterling or target exchange rates.

    "We've never had a policy of targeting the pound. Our policy is to target inflation. And that I think has been the right one," she told the BBC's Andrew Marr programme. (AtW's comment: country with negative balance of payments will import inflation if currency falls you stupid bint!)

    "If we don't step in to support the economy now and help people through this, it will cost us more in the future because we will see a recession which lasts longer, which runs deeper, which keeps unemployment higher for longer."

    In response to her comments the Conservatives said that the Government itself was to blame for the pound's weakness.

    "The Government says it will not "step in" as the pound slides to parity with the euro, but it is this Government's reckless intervention which has caused the pound's weakness," said Philip Hammond, Shadow Chief Secretary to the Treasury.

    "Gordon Brown's huge borrowing programme which has been ridiculed by the Germans and cautioned against by the IMF and the European Central Bank, has now been firmly rejected by the markets, which have responded to Brown's economic policies by dumping sterling," he said.

    #2
    It's almost like you enjoy the once great country heading for ruin.


    Pass the popcorn.

    Comment


      #3
      Originally posted by AtW View Post
      Sterling: fears increase as economic woes deepen
      The pound could fall further this week on the back of a raft of gloomy data –
      Why does gloomy data always arrive on a raft?

      Surely a spreadsheet or a file of A4 papers would be more suitable?
      And what exactly is wrong with an "ad hominem" argument? Dodgy Agent, 16-5-2014

      Comment


        #4
        Originally posted by DimPrawn View Post
        It's almost like you enjoy the once great country heading for ruin.
        No.

        I'd prefer it to be the other way around.

        It is not happening this way because of wrong things that were done in this country, exposing this things now is the only chance UK has got to fix them.

        Comment


          #5
          Some Tory or other on Newsnight said government borrowing would also be more difficult if there were a run on the pound.

          Comment


            #6
            Originally posted by TimberWolf View Post
            Some Tory or other on Newsnight said government borrowing would also be more difficult if there were a run on the pound.
            They will have problems with borrowing - rates are low and currency in which gilts are denominated is falling (and it's not reserve currency), crazy thing to buy such bonds now when on offer you can get same thing from eurozone or USA.

            If BoE drops rates further (to 1%) then pound would really be in the crapper.

            Comment


              #7
              Originally posted by TimberWolf View Post
              Some Tory or other on Newsnight said government borrowing would also be more difficult if there were a run on the pound.
              so now its the tories fault ?
              (\__/)
              (>'.'<)
              ("")("") Born to Drink. Forced to Work

              Comment


                #8
                Originally posted by EternalOptimist View Post
                so now its the tories fault ?
                No, they just seem to be a little bit more clued-up, though no doubt biased on the doom-mongering side.

                Comment


                  #9
                  Originally posted by TimberWolf View Post
                  No, they just seem to be a little bit more clued-up, though no doubt biased on the doom-mongering side.
                  So, is it best to borrow loads when the pound is high, then pay it off when the pound is low ?
                  (\__/)
                  (>'.'<)
                  ("")("") Born to Drink. Forced to Work

                  Comment


                    #10
                    Originally posted by EternalOptimist View Post
                    So, is it best to borrow loads when the pound is high, then pay it off when the pound is low ?
                    Not if you buy pounds using foreign currency...

                    Comment

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