U.S. Dollar, Pound Reach Record Lows Against Yuan, Euro
Meanwhile, the U.S. dollar is not the only currency falling. The pound reached a new all time low against the euro, so that a pound is now worth less than €1.25. Which alternatively formulated means that the euro for the first time ever cost more than 80 pence. Back in December, when I first started to warn that the pound would fall, it was worth €1.38.
These currency trends are likely to continue. In the case of the yuan it is in fact a certainty as it has different dynamics than other currencies and is directly controlled by the central bank that is committed to a gradual but basically uninterrupted appreciation against the dollar. The pound will likely continue to fall as the U.K. economy will continue to slow and probably fall into a recession. Still, the downside potential does not look as great as in the case of the U.S. dollar, as the Bank of England has not -at least not yet- been as aggressive as the Fed in its inflationist response to the downturn.