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Pound Slides Lower
By Benny Nardino | January 23, 2009
London: The pound continues to slide lower as traders fear of banking nationalisation looms. The fear of Royal Bank of Scotland and many more UK banks falling into the hands of the government has weighed heavily on the currency like a “bad smell”.
This triggered a selloff all week as the Government dithered on nationalisation clarification. The UK started 2009 on the wrong side of the recession with series of bad news, excessive borrowing and rate cuts spill-over from December. As a result, sterling have lost considerable grounds on the dollar, the euro and the yen since Monday this week as escalating worries that the global economy hitting the hardest in Britain.
Underlining this weakness on the UK economy last week, the National Institute of Economic and Social Research estimated that UK economic output fell 1.5 percent in October-December, its fastest contraction since 1980. With risks aversion hightened by recession fears, the pound, GBP has been under immerse selling pressure.
These confluence of bad reports hasn’t instil trading confidence. We have now seen sterling, GBP tumbled alongside high-yielding currencies like the Australian AU$, and New Zealand NZ$ dollars, which are often considered barometers for risk demand.
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At some point today, the cable, GBPUSD slump to 1.3502 – a level never seen since 1985 when President Reagan and Thatcher were in power. While the dollar has gained on the pound sterling is significantly note-worthy, other currencies are also trading record level gains. The GBPJPY for example traded below the 120.00 for first since the cross was created in the ’70s. The Euro, EURGBP on the other is almost at parity – 0.93.
What does this all mean? Simply put, the foreign goods and services we have come to depend on becomes more expensive. In the present economic climate many of those services are having to be sacrificed. That is a stern concern to everyone as lose their jobs.
However, despite sterling’s slide in the last few weeks and months, there are many of us in the market place who still believe that the slide has hit bottom. If the interest rates remain, we believe there could be a reprieve in the short-term.
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Tags: Currency, dollar, dollars, euro, Forex, pound, pounds, slide, slides, USD
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