Wednesday, November 12, 2008

Pound Falls To New Lows (Again)

The U.K. pound fell to yet another low today, reaching a new all time low against the euro, at less than €1.20/£ (which in inverted terms means that the pound cost a record high €0.84). It also reached a 6 year low against the U.S. dollar and a 13 year low against the yen.

The supposed reason for the decline was that the Bank of England forecasted weaker growth and inflation, which of course means increased likelihood that they will cut interest rates further. But given the fact that they had already signaled that they would emulate Ben Bernanke's aggressive strategy and ignore its inflation target, I find it strange that anyone would find it surprising that the Bank of England is planning more aggressive interest rate cuts.


Blogger Wille said...

I am not surprised by the pounds relative weakness, although I am puzzled by it's continued weakening against the dollar and euro (just as I am by the dollars recent strengthening)..
It has been pretty well-known that most "experts" have assumed that UK interest rates will fall to between 2-3% during this recession, so the fact that the actual cuts have not been discounted in the price is a bit surprising..

To me personally the whole thing is bittersweet: most of my holdings are in GBP denomination these days, but I often get paid in other currencies, so I win some, lose some..

1:50 PM  
Anonymous Anonymous said...

The US FED currently creates an enormous amount of dollars.

The days of dollar strength are counted.

Watch out below and buy gold,

Göran, Sweden

2:07 PM  

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