Britannia Radio

Sterling slammed

Posted by Neil Hume on Oct 12 09:50.

News of Gordon’s great autumn clearout (what am I bid for this bridge, bookmaker and uranium enrichment company?) does not seem to have impressed the FX market.

Monday’s price action and headlines:

RTRS-STERLING EXTENDS LOSSES, HITS 6 1/2-MTH LOW VS EURO OF 93.08  PENCE.

Against the US dollar:

And the Bank of England sterling index:

According to traders, the £16bn disposal plan has underlined once again just how bleak the outlook is for UK public finances. On top of that there is a report from the Centre for Economics and Business Research (CEBR), which says interest rates could stay at 0.5 per cent until 2011,  the GBK could fall below €1.o0 and extra £75bn of paper could be printed.
New cebr forecasts for the UK economy released today are the first to build in the effect of a maj0r fiscal consolidation in th UK after the election. The forecasts show that the fiscal consolidation is likely to be matched with an unprecedented monetary relaxation.

The forecasts show base rates of 0.5% to 2011 at least, remaining below 2% to 2014. They show an additional £75 billion of quantitative easing (purchasing a wider range of assets than hitherto). They indicate a sharp fall in the long bond yield to 2.8% by 2011 and 2.5% by 2013 and a weaker pound, falling to $1.40 and possibly below €1.00 (depending on whether the markets get worried about the long term sustainability of the euro).

The FTSE, by the way, continues to chug higher, hitting a fresh high for the year on Monday:

Related link:
Intervene or do not intervene, there is no try  - FT Alphaville

This entry was posted by Neil Hume on Monday, October 12th, 2009 at 9:50 and is filed under Capital markets, People. Tagged with cebr, Dollar, euro, gordon brown,sterling.