The U.K. pound continued to fall against the U.S. dollar and the Japanese yen today, despite the correction seen in some other dollar- and yen-based currency pairs, as the traders expect a major rate cut by the Bank of England.
Traders bet that the Bank of England will have to cut the interest rate by 100 basis points down to 2.00 percent on December 4th to protect economy from falling down even faster amidst the recession and the global financial crisis. While positive to the economy such a rate cut will definitely eliminate one of the main advantage of the British pound — its high yield.
Currency analysts believe that the pound is still viewed as the high-risk and high-yield currency and behaves according to the respective market patterns. But if the BoEs interest rate decreases continues at the current pace, the pound may soon join the dollar and the yen in their «club» of the currencies with the rate close zero.
GBP/USD declined from 1.4886 to 1.4829 as of 10:16 GMT today. GBP/JPY dropped only slightly today — from 138.42 to 138.03, while EUR/GBP rose from 0.8473 to 0.8527.
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