Sterling at multi-month lows on public finance, rate view
* Sterling hits multi-month lows vs euro, dlr, basket
* UK govt asset sales reminder of dire public finances
* UK interest rates set to remain low for long time
By Jamie McGeever
LONDON, Oct 12 (Reuters) - Sterling fell on Monday to its lowest in over five months against a basket of currencies, as British government plans to sell off 3 billion pounds of assets served as a reminder of how bleak the outlook is for UK public finances.
The plans are part of a broader programme to raise 16 billion pounds and were flagged long ago, but the details will come in a session devoid of major economic data or events, leaving traders to maintain their bearish view on the currency.
A report from the consultancy Centre for Economics and Business Research on Monday also said interest rates could stay at the record low of 0.5 percent until 2011, and that the pound could fall to $1.40 and possibly below parity with the euro.
With trading activity lighter than usual owing to a national holiday in Japan and some U.S. financial markets closed for the Columbus Day holiday, the euro rose to its highest since late March well above 93 pence EURGBP=D4 and cable fell to a near five-month trough of $1.5728 GBP=D4.
"We are seeing generalised sterling weakness ... once again but one additional pressure this morning may be the government's expected announcement of 16 billion pounds in asset sales," said Daragh Maher, head of FX strategy at Calyon in London.
"Although this will help support spending and help cut debt, it serves as a reminder to the market as to just how strained public finances are, and the burden this places on future growth," he said.
For more on the government's plans to raise 3 billion pounds, which Prime Minister Gordon Brown will detail later on Monday, see [ID:LB146654].
In early London trade sterling's trade-weighted value against a basket of currencies was fixed at 77.6 =GBP, its lowest since late April.
The pound GBP=D4 traded as low as $1.5728 against the dollar, its lowest since May 21 and down 0.6 percent on the day, while the euro rose more than a third of a percent on the day to EURGBP=D4 93.36 pence, a high not seen since March 27.
The broadly weaker pound was also mired at multi-year lows against the Norwegian crown and the Australian and Canadian dollars.
But the scale of the problems facing the public finances is huge. Britain's budget deficit is swelling to a record 220 billion pounds or 12 percent of gross domestic product -- bigger than most of its peers' -- and how to cut it is a key political theme in the run-up to a national election due by June next year.
UK opposition leader David Cameron said last week that printing money -- a reference to the Bank of England's quantitative easing programme -- risked fuelling inflation if it continued much longer.
The Conservatives are tipped to win an election due by next June as they hold a durable lead over Prime Minister Gordon Brown's Labour Party in the polls.
One solace for sterling bulls in the short term may be market positioning. Speculators' bets are heavily skewed against the currency, according to the latest International Monetary Market data from the Chicago futures exchange.
Andy Bolton
Currency Exchanges in the UK | Online Currency Converter
Courtesy: uk.reuters.com/article/idUKLC26782120091012?pageNumber=2&virtualBrandChannel=11564Technorati Tags: currency exchange uk, online currency exchange
* Sterling hits multi-month lows vs euro, dlr, basket
* UK govt asset sales reminder of dire public finances
* UK interest rates set to remain low for long time
By Jamie McGeever
LONDON, Oct 12 (Reuters) - Sterling fell on Monday to its lowest in over five months against a basket of currencies, as British government plans to sell off 3 billion pounds of assets served as a reminder of how bleak the outlook is for UK public finances.
The plans are part of a broader programme to raise 16 billion pounds and were flagged long ago, but the details will come in a session devoid of major economic data or events, leaving traders to maintain their bearish view on the currency.
A report from the consultancy Centre for Economics and Business Research on Monday also said interest rates could stay at the record low of 0.5 percent until 2011, and that the pound could fall to $1.40 and possibly below parity with the euro.
With trading activity lighter than usual owing to a national holiday in Japan and some U.S. financial markets closed for the Columbus Day holiday, the euro rose to its highest since late March well above 93 pence EURGBP=D4 and cable fell to a near five-month trough of $1.5728 GBP=D4.
"We are seeing generalised sterling weakness ... once again but one additional pressure this morning may be the government's expected announcement of 16 billion pounds in asset sales," said Daragh Maher, head of FX strategy at Calyon in London.
"Although this will help support spending and help cut debt, it serves as a reminder to the market as to just how strained public finances are, and the burden this places on future growth," he said.
For more on the government's plans to raise 3 billion pounds, which Prime Minister Gordon Brown will detail later on Monday, see [ID:LB146654].
In early London trade sterling's trade-weighted value against a basket of currencies was fixed at 77.6 =GBP, its lowest since late April.
The pound GBP=D4 traded as low as $1.5728 against the dollar, its lowest since May 21 and down 0.6 percent on the day, while the euro rose more than a third of a percent on the day to EURGBP=D4 93.36 pence, a high not seen since March 27.
The broadly weaker pound was also mired at multi-year lows against the Norwegian crown and the Australian and Canadian dollars.
But the scale of the problems facing the public finances is huge. Britain's budget deficit is swelling to a record 220 billion pounds or 12 percent of gross domestic product -- bigger than most of its peers' -- and how to cut it is a key political theme in the run-up to a national election due by June next year.
UK opposition leader David Cameron said last week that printing money -- a reference to the Bank of England's quantitative easing programme -- risked fuelling inflation if it continued much longer.
The Conservatives are tipped to win an election due by next June as they hold a durable lead over Prime Minister Gordon Brown's Labour Party in the polls.
One solace for sterling bulls in the short term may be market positioning. Speculators' bets are heavily skewed against the currency, according to the latest International Monetary Market data from the Chicago futures exchange.
Andy Bolton
Currency Exchanges in the UK | Online Currency Converter
Courtesy: uk.reuters.com/article/idUKLC26782120091012?pageNumber=2&virtualBrandChannel=11564Technorati Tags: currency exchange uk, online currency exchange
