The British pound is coming under pressure again on the currency markets as investors dump the pound in favour of currencies like the Euro and the US Dollar!

Sterling has dropped to the following rates:

One UK Pound will get you just $1.37 in the USA – this is great for the travelling American so they can come to visit our shops like we did when the rate hit over $2 to the Pound!

One UK Pound will get you €1.06 – which is not quite as low as it has been, but it is still very low and will likely give you a par exchange at the airports when you are travelling abroad.

One UK Pound will translate to Australian $2.10 – for those of you that are travelling further afield!

One UK pound gets Japnese Yen 121.77 – Which is not good for Japan exporting cars to the UK and this will put pressure on these car manfacturers!

From a business perspective this is good for companies that export to other countries and especially to the US and Europe, because our goods become so much cheap cheaper (up to 35% cheaper in the USA from the Sterling high last year) to those countries where we export.

However, where companies are heavily dependent upon imports, then where these come from within the Eurozone and from the USA, their costs will have risen sharply and of course could force them to either put up their prices or could force them out of business all together! Where prices are forced up, this could put pressure on inflation within the UK, which is the last thing we need right now!

The Pound against the Euro is almost on free-fall and ended last week at an all time low and today is trading yet lower and stands at 1.05435.

The good news for the UK economy on this though is when we see Christmas shoppers from Southern Ireland coming across in their droves to shop in Northern Ireland where shops are offering parity for the Euro. It will also make it cheaper for tourists to come and visit the UK of course, but will obviously make it more expensive for us to travel to Europe.

The lower Euro will also help exporters, as our exports will be that much cheaper, however, the underlying reasons for the fall in Sterling against the Euro are what is more to be worried about. The Government has borrowed heavily to get the country out of the current economic mess and investors are worried that the UK economy will be hit particularly badly and more than most countries over the present financial crisis.

Sterling against the Dollar has fallen over the past two weeks, but not to the same degree and the Euro has strengthened against the US Dollar too, which has not helped Sterling.

This week saw the Eurozone slip into recession for the first time since its inception back in 1999.

This week also saw Hong Kong go into recession, with the UK heading for a long and painful recession too. The Pound too a hammering this week against the Dollar falling to a low of just below $1.48 this week. The UK government needs to be careful about how it tackles the present situation and it is not careful, too much borrowing to afford tax cuts and more government spending will cause further falls in the Sterling/Dollar rate. The shadow chancellor, George Osborne, has been criticising the Government and in particular Gordon Brown over his handling of the present situation, which has lead to a warning from Gordon Brown Gordon warning that his actions could lead to a sterling collapse.

So what do we have to look forward to? We have already seen world-wide interest rate cuts and we are to see government spending and tax cuts to help stimulate world economies. This weeks G20 summit has seen world leaders speaking about working together to solve the world financial crisis. The Brazilian President, Luiz Inacio Lula da Silva has voiced his views on the validity of G8 and has said that G20 is much more relevant to the world.

The world leaders at the G20 summit held in Washington have pledged to work together to restore global growth.

We have seen that the G20 leaders have been agreeing on banking reforms to change the financial system to help get the world through this present crisis and to put safety measures in place to prevent the same thing happening again in the future. One way that will help prevent such a situation is to put incentives in place to prevent banks from taking excessive risk.

Mortgage deals low on the ground

The type of deal that used to help first time buyers and others to move home are disappearing fast. Mortgage deals offering a 5% deposit are almost gone altogether and 10% deals are falling fast to around 66 on the market right now, whereas back in February this year were close to 1,200 deals. The other problem that mortgagees face is not having the 1.5% cut being passed on, which is more down to LIBOR being a high rate than base rates.

Pension payment reductions on the cards

AXA have warned about the consequences of people stopping or reducing their pension payments in the face of economic problems, their press release on 15th of November highlights:

“Urgent action needed to prevent £35 billion pension hole”

There are around 1.5 million people planning to stop pension contributions as recession bites and that a two-year pension payment break would cost a 35 year-old man £28,700 from his retirement fund!

The press release comments – “Around half (53%) of those planning a pension break said they were doing so to offset the increased cost of living or to clear debts, with a further 13% blaming increased mortgage payments.”

To see the whole press release click here.

Oil prices down to a low

Oil prices dipped again this week with Brent Crude falling to just over $50 a barrel. Opec are looking to reduce production yet again as we see Iran calling for reduced output as the price of oil drops amid the world economic slowdown. The dramatic falls in the oil barrel price has have major effects on the Russian economy where their economy has become accustomed to high oil prices and with the reduced income has put pressure on their financial systems.

Government support for the car industry

This week also saw the US government in discussion and looking to vote on a bill to pledge $25 billion ($17 billion) to the three major car manufacturers, Ford, Chrysler and General Motors. I am not quite sure whether this is quite what represents a free capital market, but unions of the major car-makers have warned of the dire consequences if any one of the big three went bust.

End of the week saw:
Stock exchanges:
FTSE 100: 4,233
DOW: 8,497
S&P: 873
Nikkei: 8,462

Currencies
UK Sterling £ to US Dollar $ 1.4854
UK Sterling £ to Euro € 1.17167
UK Sterling £ to Aus $ 2.29331
US Dollar $ to Euro € 0.788795

Commodities
Nymex Crude oil – $56.43
Gold – $742.90

The UK’s Pound continues to take a hammering in the markets and is at it’s lowest level since mid 2002 having now fallen to $1.47993!

Sterling has also fallen against the Euro dropping to €1.17855, representing a record low since its introduction. This is both good and bad news for the UK economy, with exports from the UK becoming cheaper to Americans and Europeans, but the reasons behind the fall being the bad news.

The UK economy is heading for an extremely rough ride and a possible deep recession, with the Bank of England hinting at more base-rate cuts, if needs be, having cut the base-rate to just 3%.

The pound has continued to fall against the US dollar, hitting its lowest level since April 2006 on fears that the UK is heading into a recession this year.

Sterling fell to a low of $1.7771, and was recently trading at $1.7668. The weak pound weighed on shares, and the FTSE 100 stock index lost more than 2%.

Sterling has fallen sharply over the past month, down from July highs that saw one pound buying two dollars.

Wednesday’s slide comes as the Bank of England starts a rate-setting meeting.

The Bank is due to give its verdict on interest rates at midday on Thursday, with most analysts expecting it to keep borrowing costs unchanged at 5%.

Measured against a basket of currencies used by the UK’s main trading partners the pound is at a 12-year low.

Earlier on Wednesday, the pound had staged a small rally after better than expected figures on the service sector.

However, analysts had warned that any rebound may be short-lived because of the negative sentiment surrounding the currency.

Any rise in the pound would give “an excuse to sell sterling again at slightly better levels”, said Lee Hardman, currency analyst at BTM-UFJ bank.

Difficult outlook

The US currency has been gaining ground in recent weeks and on Tuesday the euro fell to a eight-month low versus the dollar, dipping to below $1.44.

Falling oil prices, which hit a five-month low on Wednesday, have been a factor behind the dollar’s rally.

Investors had bought commodities to protect against the dollar’s weakness earlier this year but are now unwinding those positions – to the US currency’s benefit.

Analysts also said the dollar was strengthening because the US economic outlook appeared better than the deteriorating picture in the UK and the eurozone economies.

“We’re seeing a continuation of the trend where sentiment on the rest of the world is deteriorating while sentiment in the US is improving, albeit from a very low base, and the dollar is outperforming as a result,” said Adam Cole of Royal Bank of Canada.

Gloomy comments over the weekend from UK Chancellor Alistair Darling, who warned that Britain was facing its toughest economic challenge for 60 years, triggered sterling’s plunge on Monday, which were exacerbated when the OECD predicted that the UK would be the only major industrial country to plunge into recession this year.

News reported by The BBC

The dollar has lost some ground against the euro, a day after hitting a six-month high against the single currency.

The euro has been rattled by growing fears of a European recession. Sterling has also been falling against the dollar, hitting two-year lows.

But the dollar slipped on fears about the US economy as the Federal Reserve signalled that weak financial conditions and growth would continue.

Currency traders were also taking profits on recent gains, analysts said.

The euro was trading at $1.4730, above Tuesday’s six-month low of $1.4570.

The pound stood at $1.8463, after falling to a two-year low of $1.8330 a day earlier.

Geoffrey Yu, a currency strategist at UBS in London, said that the dollar weakness was likely to be temporary.

“Investors are finding it hard to find reasons to get into the dollar and chase this move further (right now),” he said.

“We are still positive in general on the dollar – we see the euro at $1.40 by year end – but it’s probably wise to exercise some caution.”

News reported by The BBC

UK economic growth ground to a halt between April and June, according to the latest official figures.

The Office for National Statistics said the economy stalled, showing no growth from the first quarter of 2008.

It ends a run of more than 15 years of consecutive growth in the UK and will raise expectations of a rate cut.

The 0% growth figure was down from an earlier estimate of 0.2% and lower than the 0.3% growth recorded in the first three months of 2008.

‘Challenging times’

The figures were the weakest since 1992 and the news sent the pound lower against the dollar and the euro.

The government said the economy was feeling the effects of global pressures such as high commodity prices and the continuing credit squeeze.

“The Government’s priority is to guide Britain through these challenging times, while also supporting those hit hardest as a result of these global factors,” a Treasury spokesman said.

But the Conservatives said that Labour’s economic record had been tarnished.

“The figures are very weak and suggest the UK economy is already in recession” George Buckley, Deutsche Bank

The symbolism of stagnation
Q&A: What is a recession?

“For years Gordon Brown boasted about consecutive quarters of economic growth,” Shadow Chancellor George Osborne said.

“Now economic growth has ground to a halt and Brown’s bubble has burst.”

Friday’s figures showed that the services sector, the backbone of the UK economy, grew just 0.2%, while manufacturing output fell by 0.8%. Household spending dropped by 0.1%.

Exports also fell as Europe, the UK’s main trading partner, saw growth contract in the same period.

The UK economy grew 1.4% from the second quarter of 2007, revised down from an initial estimate of 1.6%.

“The figures are very weak and suggest the UK economy is already in recession,” said George Buckley, an economist at Deutsche Bank.

The economy technically enters a recession when it shrinks for two consecutive quarters.

Rate dilemma

Bank of England governor Mervyn King has warned that the UK economy is in for a difficult and painful period due to a combination of high inflation and rapidly slowing growth.

Inflation, which at 4.4% is well above the 2% target rate, could make it more difficult for the Bank to cut interest rates to spur the economy.

But analysts said the zero growth reading could lead to lower borrowing costs by the end of this year.

“This really does put a rate cut firmly on the agenda although it is unlikely to come until we have seen the peak in inflation,” said Brian Hilliard, an analyst at SG.

News reported by The BBC

The price of oil climbed, reversing earlier falls, on the back of the weakening dollar.

US light sweet crude added $1.16 to 114.03 a barrel, while in London, Brent crude added 99 cents to $112.93.

The dollar weakened against the euro after official US data showed inflation was quickening, helping push up oil and other commodities such as gold.

Investors tend to buy commodities as the greenback weakens because it makes such investments relatively cheaper.

Earlier in the day, oil had fallen below $112 a barrel after Tropical Storm Fay avoided oil operations in the Gulf of Mexico.

Other commodities to rise on Tuesday included nickel, used largely for making steel, which climbed 7.3% to end at $19,395 a tonne.

“The market is going to be fairly close to balance rather than being oversupplied, and there is the prospect that the stainless steel market will recover in the next few months on a year-on-year basis,” said Dan Smith, analyst at Standard Chartered.

And copper for delivery next month added 12 cents to $3.4350 per lb in New York.

Commodities are seen as safe investment when inflation pressures are increasing.

Future falls?

Though oil prices have risen, they are far from the record of more than $147 a barrel reached in July.

And analysts are predicting that oil could fall given the current economic slowdown dents demand.

US figures due out on Wednesday expected to show a rise in stockpiles, underlining the decline in demand.

Meanwhile last week’s figures from Opec hinted that global demand for oil is set to slow.

The oil cartel’s monthly report predicted global oil demand would grow by one million barrels a day in 2009 – 30,000 barrels lower than its previous forecasts, and its lowest growth since 2002.

But current geopolitical tensions in Georgia, where Russian troops are pulling out of the region, and in Pakistan, following President Pervez Musharraf’s resignation, are likely to support prices, experts added.

News reported by The BBC

World oil prices have edged slightly higher amid concerns that oil operations in the Gulf of Mexico may be disrupted by Tropical Storm Fay.

Analysts said the weather was being monitored. Royal Dutch Shell removed about 360 workers from the region over the weekend as a precaution.

US light, sweet crude fell 42 cents to $113.35 a barrel while London Brent crude lost 46 cents cents to $112.09.

The dollar weakening slightly also supported oil prices, observers said.

In addition, supply worries lifted the oil price – which had fallen to as low as $111 on Friday.

BP said that exports of Azeri oil by rail to Georgia had stopped because of “damage” to a railway line caused during the military conflict between Russia and Georgia.

The line, which runs from the Georgian capital of Tbilisi through the city of Gori before heading to the ports of Batumi and Poti, carries between 50,000 and 70,000 barrels of Azeri oil per day.

Softer demand

The euro and pound both strengthened slightly against the dollar on Monday after the greenback had enjoyed a strong rally last week.

The falling dollar tends to push oil prices up as investors buy into crude and other commodities as a hedge against inflation.

Oil prices are still well off the peak of $147 a barrel hit in July.

Last week’s forecast by the Opec cartel of oil producing nations that demand would grow more slowly than previously thought in 2008 and 2009 also helped to prevent prices from rising .

News reported by The BBC

Pakistan’s currency has hit a record low against the dollar on speculation that President Pervez Musharraf might be on the verge of resigning.

The Pakistan rupee fell to 76.9 to the dollar on Friday, the fourth consecutive trading day it has hit an all-time low.

The currency has weakened on fears that the president faces impeachment.

Inflation in Pakistan is at its highest in 30 years, the trade deficit is widening and reserves have fallen.

The value of the rupee has dropped by 23% this year.

“It’s panic and the central bank is not doing anything,” one trader told the Reuters news agency.

Some investors say intervention by the central bank is needed to bolster the currency, but given its lack of capital this would be hard.

Mr Musharraf, who was involved in a coup that toppled former Prime Minister Nawaz Sharif in 1999, is being threatened with impeachment by Pakistan’s new ruling alliance.

News reported by The BBC