Pound Falls

Sterling continues to decline against the dollar and other major currencies
Saturday 15th November 2008

As sterling continues to fall in the foreign exchange markets there is real concern with the rate against the dollar down to $1.4715 and down to 84.7p against the Euro. There is real fear that sterling could yet fall further with interest rates likely to decline in the short term (Gordon Brown recently asked for a substantial cut) and the economy set to move into recession over the next few months.

The problem which the currency presents the government is the fact that imports, especially against the dollar, are very very expensive when you consider the rate has fallen back from over two dollars to the pound. This is the issue which many economists believe will force the UK into something of a major recession and possible depression with deflation coming to the head of the table. This would be a worse case scenario and literally see the UK economy collapse in a cloud of doom and gloom.

We recently saw major UK retailer Next Group announce that clothing was likely to rise in cost in the short term because of the currency exchange rate and the increased cost of goods from American. This has the potential to cause major upset with the UK economy although the government is in no situation to increase interest rates to protect the exchange rate which offers something of a quandary.

Courtesy: Punds - Euros - Dollars | financialadvice.co.uk