Hornblower
Well-known member
- Jul 7, 2003
- 1,710
I'm off to the US at the end of the year, is the pound going to continue it's freefall against the dollar or will it have recovered a little by then?
The reason why the £ has dropped so much against the $ in the last week or two is because there is scope in the UK economy to cut interest rates (and aggresively) by the Bank of England and that the US cannot do this anymore because they have already done this in the last 12 months and they have no or very limited scope for cuts anymore. I think their interst rates are 2% ours is 4.5%.
US rate is 1.5%, expected to be knocked back to 1% by the Fed later this week.
But that is why the £ has fallen so much. Economists talk of our interest rates going as low as the US's too, and therefore we have greater scope for more cuts, that is why the £ seems so unnatractive to investors.
The UK moving into recession makes investors want to sell their UK assets and move their capital out of the country, hence selling £'s. The US is once again (surprisingly) being seen as a safe haven and so much of the outflows from Sterling are going into Dollars.
the only silver lining to this particular cloud of course being those who ignored the hype (on here particularly) to lock into high fixed rate deals and go for base rate trackers!
Heres a forecast that it will climb till the end of the year.
Provided by British Pound to U.S. Dollar Currency Exchange Rate Forecast
Or course if it was reliable we would all get rich !!!
The UK moving into recession makes investors want to sell their UK assets and move their capital out of the country, hence selling £'s. The US is once again (surprisingly) being seen as a safe haven and so much of the outflows from Sterling are going into Dollars.
Indeed. I've seen a UBS analyst report that UK base rates will be 2% by mid-2009. That is the time to fix for 5 years.
That they predicted 1.77 for October and we're in the mid 1.50s, is not giving me much faith in their reliability.
I would argue that the fed has plenty of scope for rate cuts, the japs went to 0% in the nineties.This is not right. The US is in recession too. It is a global phenomenon. The US$ has also done well against the euro too in the last few weeks because the fed has no more (or very little scope) to cut any further i.e the dollar was as low as it almost can possibly be when it was $2+ to £1. Both the Euro and £'s central banks have more scope to cut than the Fed.
Low interest rates discourage (overseas) investors to put their assets into a country's currency because they get very poor returns on their money.
A safe haven in times of economic crisis has always been gold, as it is a tangable asset.
There are some better forecasters out there. Gavin lent me this book a few weeks ago, well worth a read.
Amazon Online Reader : "Dow, 30,000 by 2008" Why It's Different This Time - Second Printing
This is not right. The US is in recession too. It is a global phenomenon. The US$ has also done well against the euro too in the last few weeks because the fed has no more (or very little scope) to cut any further i.e the dollar was as low as it almost can possibly be when it was $2+ to £1. Both the Euro and £'s central banks have more scope to cut than the Fed.
Low interest rates discourage (overseas) investors to put their assets into a country's currency because they get very poor returns on their money.
A safe haven in times of economic crisis has always been gold, as it is a tangable asset.