Monday, September 8, 2008

The rebounding dollar

Did you put off that trip to England because of costs--well, it's getting cheaper by the minute as the UK economy tanks worse than the U.S. The graph says it all but here's an excerpt from the Wall St Journal article it was in.

Weakening Pound Has Room To Continue Downward Spiral
By CARRICK MOLLENKAMP and MARK WHITEHOUSESeptember 8, 2008
LONDON -- After holding its own against the U.S. dollar throughout the financial crunch, the British currency could be in for a prolonged pounding.
Already down nearly 10% against the dollar over the past month, the pound faces a crisis of confidence as investors fret about U.K. policy makers' efforts and ability to manage a sharp economic downturn. While short-term surges are likely, analysts and economists see deeper issues that could cause it to slide further.
The bleak outlook stems from a confluence of factors. For one, while the credit crunch will prove punishing for the U.S., the prospects for the U.K. are increasingly worse.
Many forecasters believe the British economy is already in a contraction that will last at least through the end of this year. The gloomy outlook, together with waning inflation fears, increases the odds that the Bank of England will lower interest rates, lowering the returns investors can reap by putting their money in pounds.
More important, conflicting messages from the U.K. government have raised concerns among traders and investors that policy makers don't have a handle on the depth of the country's economic woes, or on how to respond.
We'll now return you to our regularly scheduled vacation highlights.--JT

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