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Posted November 17th, 2008 by Charles Purdy

Weekly US$ rates and comments – week commencing 17th November 2008

Sterling is in the pits. The constant stream of increasingly negative data over the last year as well as the gloomy outlooks on the year ahead have left a sad picture of the UK economy. The recent flurry of well publicised job cuts and the ever growing sense of an impending recession (that may or may not have ‘technically’ started already) has new, unwanted benchmarks being set by sterling daily. The hope that monetary policy will be of any help against the current woes in the short term and this within a financial system already proven to be flawed is perhaps over optimistic. So don’t expect any upside for sterling in the short term. Further downside seems more likely.

The US$, currently at 1.494/£1, and its movement against sterling over the past months has been relentless. The wave of optimism brought about from the promise of President Elect Obama leading the nation away from the current crisis and an end or at least a relenting of worldwide unpopularity has filtered quickly through to the markets. The continuation of risk averse investors returning to the US$ as a safe-haven asset and the notion that the US may be ‘over the worst’ of the credit crisis has certainly helped. How accurate this notion is however will be tested over the next few months.

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