Currency news - Sterling under pressure

Sterling under pressure - 15-12-08

The UK currency hit a record low against the Euro for the fifth successive day on Friday with lows near the 0.90 level before a marginal recovery. Sterling was also unable to regain the 1.50 level against the dollar.

Confidence was undermined by further stresses within the banking sector which fuelled a wider loss of confidence. HBOS recorded an increase bad-debt provisions which triggered a sharp decline in the share price even though the takeover by LloydsTSB was approved. There was also a warning of increased bad debts by HSBC.

Overall confidence is liable to remain very weak in the short term with all economic sectors under pressure and the Rightmove organisation reported a further decline in house prices for November, although there is the possibility that consumer spending will hold steady in the very short term which could trigger some rebound in confidence. The UK Treasury stated that it would not intervene in the market to support Sterling.

Attractive valuations should also trigger some direct investment inflows. Sterling remained trapped near record lows against the Euro on Monday with markets continuing to attack the currency.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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