July 5th 2005
British Pound may decline as growth flattens
For the last few years, speculators in search of high interest rates have poured ‘hot money’ into Britain, causing the Pound to appreciate. Now, it seems the Pound may be overvalued, rendering British exports uncompetitive. A new spate of economic data indicates the British economy is slowing rapidly. In addition, a British housing bubble has begun to deflate, causing a subsequent decline in consumption. As Britain’s Central Bank prepares to lower interest rates, it seems investment will follow the same downward path as consumption. It may take a massive correction of Britain’s exchange rate to stem the decline of its economy. The Times Online reports:
With sterling’s valuation the focus of renewed attention, pressure on the pound will almost certainly intensify as currency markets home in on the increasingly apparent vulnerabilities of Britain’s economy.
Read More: Faltering growth knocks pound’s potency