The Pound Falls Again

Posted by Allison on 1 June 2009, 12:49

In the head to head that has occurred between the British pound and the US dollar of late, things have definitely not been going in favour of the pound.

If you often read the latest news stories online, you will no doubt have read plenty along the lines of this one from the Telegraph.

Even the weak $1.50 pound seems like a distant memory now, as we’ve been sliding ever further away from it in recent weeks.  Let’s take a look at what has happened since the middle of February for example, to see how this slide began.

Valentine’s Day fell on a Saturday this year, and the pound sat at $1.4503 over the weekend in readiness for the following week.  It soon slid down to 1.4270 when Monday arrived though, and it has struggled to cling onto the middle forties ever since.

It finished the 20th February on 1.4291, leaving even more space between the $1.50 mark and where the pound actually sat at present.  It just didn’t seem to have the power to cling on to that level.  It did manage to creep back up to a reasonably good 1.4576 before the end of the month, but it didn’t even manage to hang onto that.  It seems as if the pound has got caught in a prolonged sense of apathy at the moment, and nothing looks able to pull it out.

There has been some speculation that the quantitative easing measure of actually printing more cash might do the trick.  But the pound is so far into the doldrums that perhaps it would be naïve of us to think that it would suddenly improve its status and soar back to the two dollar level that it held in the summer of 2008.  It could be months yet before we ever see figures like that again.

This might all sound very negative but you only need to look at what the exchange rates between the pound and the US dollar did in early March to see that this is true.  February ended as low as 1.4157, and that exchange rate sank down to 1.4083 by the 3rd March.

And it had further to fall too.  On the 9th March – just two days before this article was written – the pound had slumped to 1.3786, and it showed no signs of perking back up again either.

So the question now is just how much lower could the pound go?  It seems as if we are continually saying that the pound is getting weaker and weaker, and indeed it is.  But is this set to get even worse? 

We should remember that many countries are struggling to get to grips with the effects of this recession at the moment.  Some of the events we are seeing are pretty much unprecedented, at least in our lifetimes.  It might be easy to say that the British pound could never actually completely collapse, but would that statement be true?

We are a long way off from seeing that happen, but no currency is ever 100% safe.  Even the mighty dollar couldn’t claim that status, and all the currencies are forever changing and claiming different amounts on any currency converter.

But with such a low pound at the moment, it will be interesting – if not worrying – to see how things develop in the near future.

 

Comment

  1. I love going back over old stories and reports on this website and seeing how much things have changed since then. 1.3786 was what the pound was worth against the US dollar back on the 9th March and now it is much higher, hovering around the 1.54 mark I think as I write this.

    But now we are looking at the pound and saying how weak it is at the moment. And yet it is a lot healthier than it was back then!

    It just goes to show that everything is relative. When it was worth 1.37 we would have given anything for it to be worth 1.54. Time is a big influence on the currency markets, and we just have to ride it out and see what happens next.

    — Ben · Apr 27, 08:04 PM · #