Why Pound Sterling is falling

Source: ONS

  • This graph of economic growth shows how quickly the UK economy has deteriorated. It explains why the MPC cut interest rates by 0.5%. It also explains why many are calling for future interest rates cuts. Some forecast interest rates could fall to as low as 1%.
  • With UK interest rates forecast to fall significantly, the value of the Pound since the summer has fallen by nearly 25% against the dollar.
  • Lower UK interest rates mean it is less attractive to save in the UK, reducing demand for Pound Sterling
  • Another reason for the strength of the dollar against the Pound, is the growing uncertainty of emerging economies. Hedge funds and investment trusts have been selling their investments. Since most of these hedge funds and investment trusts are based in dollars, there has been a rise in demand for dollars. This explains some of the recent strength in the dollar.
Video on Pound Sterling

Perma Link | By: T Pettinger | Monday, October 27, 2008
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