Are We Harming The Pound Ourselves?

Posted by Allison on 1 April 2009, 16:31

It might seem like a strange thing to say, but it really can happen. And it is all down to the news that is coming out of the country at the moment.

It is a bizarre situation when you think about it. We need to try and improve the strength of the pound, but that isn't going to happen when we are announcing bad results and further downturns as far as the economy is concerned.

Take this news story from the Currency News website, for example. You can read here. This was published at the beginning of December, and as you can see it isn't exactly chock full of good news as far as the UK is concerned.

Of course, you cannot hide what is going on in your own country. The powers that be need to be honest about the situation, and when the interest rates are lowered to try and help the economy, everyone will find out about it even if it wasn't announced.

But what is more telling is the fact that what could happen in the future could also have an effect on the exchange rate and the power of any one particular currency.

This can be seen in the comments made by Willem H Buiter in the article. He thinks that interest rates might dip as low as 0% in 2009. Now that may or may not happen, but regardless of that, when people heard what he said the pound dipped lower still.

So should we be a little more careful with what we say? It appears that we should be, but of course things aren't as simple as that. Who would believe the UK government or the Bank of England if they were to stand there saying that everything is alright, when it is very clear that it isn't?

After all, you only need to look at the performance of the pound against other currencies to see that there are problems afoot. At the beginning of December, for example, the pound was worth 1.8135 Swiss francs. It then dipped below the 1.80 mark just two days later, and only briefly got above it again to 1.8021 on the 8th.

From there it carried on dropping and dropping until it got down to 1.5590 on New Year's Eve. Not exactly a great place from which to start another year, but it does show that the huge amount of bad news coming out of the UK didn't do our currency any good at all. The pre-Christmas sales and brisk trading didn't quite live up to expectations at the end of 2008, and as a result more businesses went into administration during this period – and shortly after it – than we might have expected. Such are the effects of the situation we are all in.

So will we see any improvements in the New Year, or will it take until 2010 or beyond to see better statistics and figures that will boost the pound once more?

Can we really expect to see a stronger pound again in the future? Things might seem bad at the moment, but of course this situation does happen from time to time as the years go by. It is simply a waiting game to get back to better times once more.