Tweet
The pound was under fresh pressure against the euro this morning, at the start of a week in which the health of UK economy will be centre stage.
Sterling fell from €1.1150 to €1.1121 in early trading on the currency markets, close to its all-time low, as traders continued to sell the UK currency aggressively. This came a day after Yvette Cooper, chief secretary to the Treasury, confirmed that the government would not intervene to prop up the pound.
A year ago one pound was worth more than €1.40, but it has fallen steadily as the UK economic crisis has deepened. The decline has accelerated in recent weeks, prompting fears of a fresh currency crisis.
"The 12-month outlook is pretty bleak for the pound," warned Martin Slaney, head of derivatives at GFT Global Markets, who believes the UK currency is likely to hit parity with the euro soon.
The latest consumer inflation figure will be released tomorrow, and is expected to show another sharp fall from 4.5% in October - giving the Bank of England further licence to cut interest rates. On Wednesday the unemployment figure will show another sharp rise, economists believe, and on Thursday high street sales figures will indicate how the retail sector is faring in the run-up to Christmas.
Speaking on the BBC yesterday, Cooper said the government would continue to make inflation its top priority rather than the strength of the pound, prompting renewed claims from the opposition that the government's economic policies are to blame for the sterling crisis.
The fall in the value of sterling makes foreign imports more expensive and pushes up the cost of travelling abroad. The Welsh Assembly hopes to take advantage of this with a new advertising campaign pushing Wales as a holiday destination.
Experts are split over whether hedge funds and other major speculators have played a big factor in sterling's fall.
Nick Parsons, head of market strategy at NAB, does not believe they have. "It's not that," he said. "There is very little volume going through and no mass building up of positions."
But Nick Fullerton, managing director of FC Exchange, pointed out that some people will be looking to profit from the volatility in sterling.
guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds
More...