The pound touched the lowest level in more than six months versus the euro and posted declines versus virtually all main traded currencies as forecasts suggest that interest rates in the country will remain low in the long-term, adding doubts towards the British economic future.
The Center for Economics and Business Research in the U.K. impacted the pound outlook negatively today after statements indicating that interest rates will remain at record low levels until 2011 in the British Isles, followed by a timid increase afterward, decreasing attractiveness for the already weakened British currency, which has been one of the biggest losers in currency markets this year. The United Kingdom has been one of the least resilient wealthy countries this year, proving itself unable to cope efficiently with the challenges imposed by the global slump, consequently decreasing appeal for its currency among traders, and setting the pound to new record lows this week.
Forecasts released today by the CEBR added pessimism towards the future of the British economy, since record low interest rates mean in practical terms a longer period of economic downturns in the U.K., since interest rates are maintained low when a central bank attempts to stimulate loans to consequently reignite a country’s economy. The pound is likely to remain either neutral, or to extend its losses.
GBP/USD traded at 1.5801 as of 11:14 GMT from a previous rate of 1.5853 when markets opened yesterday. EUR/GBP touched 0.9338 from 0.9284.
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