Pound volatile after interest cut
The British pound has regained some ground after a one percentage point cut in UK interest rates.
In the run-up to the decision, it fell to a historic low of 1.1499 euros, but later moved slightly up to 1.1561.
The UK currency also dropped against the dollar to $1.4471, the lowest level in almost seven years, before rising to $1.4657.
In July, the pound was trading at more than $2, but it lost ground as the downturn hit the UK economy.
On Thursday, the pound also hit a new low in more than 13 years against the Japanese yen.
At the same time, the euro rose slightly against the dollar, to $1.2734.
The Bank of England slashed UK interest rates to 2% on Thursday, the lowest level since 1951.
However, analysts said the cut had been already priced into markets, as it was in line with expectations.
"Over the next few days the market will view this as a good move and we could see a little upside for sterling," said James Hughes, markets analyst at CMC Markets in London.
"But once consensus builds that there will be more cuts in January or February, then it is likely to come under pressure once more," he added.
"Disco Ball" wrote:We aren't planning on going to Europe this year because of the really bad exchange rate, the holiday this year cost a lot more compared with 2007.
Its not good for all you Europa Park travellers, the value of the holiday will be some much less compared with past trips.
Post Office are offering: 1.1070.
"Liam" wrote:One of the main reasons it is is because we know are going to have to borrow billions and billions of pounds.
And if we had been at the Euro at this point we'd be in an even worse position that we are because the ECB controls monetry policy across the whole of Europe and so Britain would not have been able to set it's own monetry policy such as interest rates to try and correct our own situation, and instead we would have been locked into what Poland or France wanted to do etc. and all of them are in different situations.
"Liam" wrote:free fall
Yes. The "main cause" infers there are extra causes, so what are you trying to say?Your remarks seem to suggest that the borrowing is the main cause of the slide, but things are not as simple as that...
The general feeling is that the UK's plan to deal with the recession is more risky than other governments in the Eurozone, so the slide is as much due to the pound falling as the Euro rising.
But again, your argument is misleading, because if Britain had been a member of the Eurozone before the downturn/recession began, it would have been unlikely to yield the same set of circumstances that we now find ourselves confronted with.
A little dramatic. On Black Wednesday the currency went into free fall. We are nowhere near that.
"Liam" wrote:Yes. The "main cause" infers there are extra causes, so what are you trying to say?
Surely you've just proved my point :P. Ie. that UK borrowing is more risky than others, and thus the main cause. Of course everything is reletive when talking about currency.
"Liam" wrote:The Black Wednesday fall will probably end up being better than this fall in the long run though as it was quick and the recovery began straight away. This one looks like it will drag.
I'm stating what you didn't state for your own rhetorical effect. It is not the borrowing that is the main issue, it is the confidence in the government's plan that is, and on the whole, the consensus among economists is that the government's plan is risky. No-one (as far as I know) has said that it won't work.
"Liam" wrote:But surely confidence in the plan is directly proportional to how big the plan is in this case, i.e. how much is borrowed. The whole point is that we can only borrow to even have a plan at all because Gordon didn't save any money. So you're trying to seperate the inseperable.
"AstroDan" wrote:One would assume that the people working with the Government on this, are experts in the economic field, and advising them as their expertise would dictate.