Forex update – GBP/sterling pound this week

Interestingly enough, this week the sterling pound has dropped to its lowest level in 12 years against a broad basket of currencies amid a wave of weak economic performance indicators released. This GBP weakening kept alive a talk about a cut in interest rates by the Bank of England. Sterling’s trade weighted index hit 89,5, the lowest level since October 1996, and the pound fell close to a record low against the Euro.

In the second quarter, UK’s economy virtually grounded to a halt, whilst the houses prices fell at the fastest pace since August 1991. Even worse, the UK retail sales plunged to their lowest level in 25 years. This raised expectations of interest rates cut, which would further undermine the pound’s appeal to investors. “The recent ULK data have been universally bearish for the pound and the path of least resistance remains further weakness”, said a JP Morgan analyst.

The pound dropped on this Saturday to $1.8188 against the USD, its weakest level in two years. This GBP fall has taken the weekly losses to 1,7%, whilst the August total fall amounted to 8%.

Meanwhile, the pound dropped 1% to GBP 0.8075 against the Euro on the week, a touching distance from the record low of GBP 0.8097 it hit in April after the Bank of England has cut the interest rates.

On a merrier note, the dollar has rallied in August 2008 when the investors realized that the credit crunch had a more serious effect outside the US than in its home turf. The dollar gave back some of its gains this week but still stood 0,7% higher on Euro at $1,4760 this week.

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