Currency Thoughts
The dollar hit a one year low against the euro of $1.4842 earlier today on ideas that a global economic recovery is gathering strength.
The Fed is set to keep it's benchmark interest rate at an effective zero today, a level that still seems likely for some time.
The minutes from this month's BOE meeting were released this morning, warning that with bank lending still weak and unemployment rising "there could be false dawns" on the horizon yet,
The Monetary Policy Committee was unanimous in its decision to not expand QE and to leave interest rates at 0.5%. They also said that they did not rule out expanding QE somewhere further down the road to recovery. It certainly seems to me that interest rate rises are not on the cards for some considerable time.
So with US rates looking like holding at or near zero and the UK stuck on 0.5% it is hardly surprising that the pound appears to be competing head-to-head with the dollar as to which of the majors is the weakest currency.
Figures earlier this week showed that the UK's public sector net borrowing was £16.1bn in August. That’s the highest figure on record for that month, taking the government's overall debt to £804.8 billion, or 57.5% of GDP. That's the cost of bailing out the banks and printing money.
If I was a foreign investor I wouldn't be very tempted to get involved in that for a princely half percent return would you?
It seems to be only a matter of time before we slip below the 1.10 mark against the euro, and I can certainly see us being close to parity by the end of the year. Any recovery here is surely going to be more than outstripped by one in the likes of France and Germany.
Against the dollar, the pound has been stuck in the $1.60-1.70 range for the past few months, and for the majority of that trapped within quite a tight band a couple of cents either side of $1.64. I don't see too many reasons for that to change for the remainder of 2009.
The Fed is set to keep it's benchmark interest rate at an effective zero today, a level that still seems likely for some time.
The minutes from this month's BOE meeting were released this morning, warning that with bank lending still weak and unemployment rising "there could be false dawns" on the horizon yet,
The Monetary Policy Committee was unanimous in its decision to not expand QE and to leave interest rates at 0.5%. They also said that they did not rule out expanding QE somewhere further down the road to recovery. It certainly seems to me that interest rate rises are not on the cards for some considerable time.
So with US rates looking like holding at or near zero and the UK stuck on 0.5% it is hardly surprising that the pound appears to be competing head-to-head with the dollar as to which of the majors is the weakest currency.
Figures earlier this week showed that the UK's public sector net borrowing was £16.1bn in August. That’s the highest figure on record for that month, taking the government's overall debt to £804.8 billion, or 57.5% of GDP. That's the cost of bailing out the banks and printing money.
If I was a foreign investor I wouldn't be very tempted to get involved in that for a princely half percent return would you?
It seems to be only a matter of time before we slip below the 1.10 mark against the euro, and I can certainly see us being close to parity by the end of the year. Any recovery here is surely going to be more than outstripped by one in the likes of France and Germany.
Against the dollar, the pound has been stuck in the $1.60-1.70 range for the past few months, and for the majority of that trapped within quite a tight band a couple of cents either side of $1.64. I don't see too many reasons for that to change for the remainder of 2009.
