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 last full week of 2008 before New Year which has seen the price of oil fall still further amid a continued down-turn in world economies.

Early 2009 will be interesting for the retail industry, as we see another high street chain “Adams” go into administration. All the stores have been discounting heavily even before the January sales so that any revenue they made leading up to Christmas would lead to reduced profits and lower bank balances than normal.

This week Zavvi was placed into administration, a retailer that was heavily dependent upon Woolworths. Woolworths has been in administration for a number of weeks now, which has had a bad knock-on effect on Zavvi and this will result in the loss of over 3,000 jobs if a buyer is not found. Zavvi sells music, DVD’s and games and was a result of a management buy-out of Virgin Mega Stores in 2007.

Oil falls to another low

This week saw oil drop to below $40 a barrel and ended up at $37.80 at the end of the week. With more bad data coming out of the US with house sales at an 18-year low, commodity traders are worried that demand will continue to fall, which has pushed the price down lower.

Car-industry woes

Toyota has seen its first loss in 71 year , with the Yen has been strengthening recently and with the world economic slow-down Toyota finds itself in an unusual position with demand for its cars falling, it is expected to report a loss of 150 billion Yen (£1.13 billion). To compare Toyota reported a profit of 2.27 trillion Yen (£17.13 billion), which puts things into perspective. Sales of Toyota cars fell by over 20% in November over the same period last year, dropping to sales of 618,000.

Sterling continues its weakening trend

This week I reported a low of just over €1.05 per pound, but the Euro has ended the week even lower at just under €1.05. We are now very close to a one to one rate and the Euro has fallen by 20% since September this year.

Sterling fall is a life-saver for UK economy, The sharp slide in the pound has been a godsend for the UK economy and may have helped Britain avert a much more serious crisis, according to the German bank Dresdner Kleinwort. – as reported by Ambrose Evans-Pritchard of the Telegraph.

Well I would like to close this weeks round up by wishing everyone a Happy New Year and that they have a Prosperous 2009 – why not vote now in our Forum Poll on The Financial Crisis.

End of the week saw:
Stock exchanges:
FTSE 100: 4,217
DOW: 8,516
S&P: 873
Nikkei: 8,740

Currencies
UK Sterling £ to US Dollar $ 1.47591
UK Sterling £ to Euro € 1.04976
UK Sterling £ to Japanese Yen 133.872
UK Sterling £ to Aus $ 2.16884
US Dollar $ to Euro € 0.711265
US Dollar $ to Japanese Yen 90.7050

Commodities
Nymex Crude oil – $37.80
Gold – $870.20

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.

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 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 pound has fallen further against the dollar, hitting its lowest level in almost two years amid fears the UK will fall into recession.

Sterling touched its lowest level since October 2006 at $1.8617 but later bounced back to $1.8736.

Measured against a basket of trade-weighted currencies, the pound is now at its weakest level since 1996.

The pound dropped sharply on Wednesday after the Bank of England issued a gloomy assessment of the UK economy.

The fall in sterling will hurt holidaymakers who have benefitted from a strong pound when travelling overseas- and make it more expensive for people to buy second homes abroad.

However, it could help exporters whose goods will be cheaper overseas.

The Bank’s governor Mervyn King said economic growth would be flat for the next year or so and that inflation would rise to 5% or above before falling.

But with domestic demand weak, a revival of exports could help the economy and limit job losses.

Rate cuts

Economists had thought inflation would prevent the Bank of England from cutting rates, but the Bank’s suggestion that inflation will begin to ease raised expectations of interest rate cuts and this hit the pound.

“We have long argued that sterling has been significantly overvalued in recent years” Jonathan Loynes, Capital Economics

Lower interest rates mean investors get lower returns on sterling deposits, which makes the pound less attractive.

Simon Derrick, currency strategist at Bank of New York Mellon, described the pound’s fall this week a “dramatic collapse” that recalled the aftermath of sterling’s ejection from European Exchange Rate Mechanism (ERM) in 1992.

However, he said the currency’s slide should begin to ease.

“Even within the most ferocious sterling downtrends in the past, significant corrections emerged in the middle of the moves,” he said.

But Jonathan Loynes, chief European economist at Capital Economics, thinks the pound could fall as far as $1.65 by the end of 2009.

“We have long argued that sterling has been significantly overvalued in recent years,” he said.

Deteriorating outlooks

Recent official figures have already shown the UK is struggling with high inflation and faltering growth.

Fears about European growth have also helped the dollar bounce back from record lows.

The US economy is still reeling from the credit crisis but analysts say the deteriorating outlook elsewhere in the world has given the dollar a boost.

Falling commodity prices have also supported the US currency. Investors had bought gold and oil to protect against dollar weakness and are now unwinding their positions.

The euro was trading at $1.4910 on Thursday, slightly above the 6-month low of $1.4815 struck this week. Earlier this year, the euro was trading at $1.60.

The euro has been further undermined by the military conflict in Georgia.

News reported by The BBC

The dollar has rallied against the pound and euro amid belief that the US economy may be in better health than other countries.

Sterling slumped to 17 month lows of $1.9225, down 1.1%, while the euro hit five month lows of $1.5195.

The European Central Bank’s decision to leave rates on hold was the main driver of the fall, traders said.

Adding to the woes were comments from the bank’s chief that economic conditions in eurozone were worsening.

“We consider that there is some materialisation of the risks that we have identified,” ECB chief Jean Claude Trichet said after Thursday’s decision to keep rates at 4.25%.

Recession fears

“Most of the fall in euro/dollar came from the extremely dovish comments from Trichet, in combination with gloomy data from the euro zone … but growth is definitely a problem everywhere,” said John Hydeskov, senior Foreign Exchange analyst at Danske Markets.

While the US is continuing to suffer from the credit crunch – with consumer confidence falling, unemployment rising and ongoing problems in the housing market – its economy is showing small signs of growth.

That is in stark contrast to several European countries which are either in recession or on the verge of it.

On Friday Italy became the latest nation in the 15-member bloc to announce its economy had contracted in the second quarter of the year – raising fears of a looming recesssion.

News reported by The BBC