Weekly US$ rates and comments - week commencing 15th December 2008

Sterling suffered another slump against the euro and drew massive media attention for hitting record lows daily. The fall in value of over 20% through this year has and will continue to have a serious impact on sectors the UK economy with added pressure on everyone from major importers through to British ex-pats having their pensions transfers sent overseas. On the flip-side of this, UK exporters who may have expected to benefit from the ever-cheapening pound have only found that business on the whole has slowed down as the global economic down-turn gains pace. Poor economic data continued to weigh on sterling with falling industrial production and a further contraction in the housing market all contributing to the demise of sterling.

 

 

The US$, currently at 1.500/£1, flattered sterling last week as the pound rose by over 3% from Monday to Friday. Whether this should be classed as a rebound from the US$'s sudden resurgence starting about four months ago or that the consistently below-par US economic data is finally taking its toll is only adding to the anticipation of another reduction in US interest rates by the Federal Reserve who will meet this week. Should US interest rates be cut below the 1% mark the precedent will be set and the UK may well be expected to follow their lead and cut at their next opportunity in the new year.