Speculation About The Weakness Of The Pound

Posted by Allison on 1 April 2009, 16:33

Let's face it - the pound is weaker now than many of us can remember it being before. And reports like this one here, give us a regular insight into just what is going on in the world of the currency markets.

But where does future speculation get us? After all, there are a lot of financial experts out there (and many more who aren't really experts at all) who tell us what we can expect in the months to come.

If you are aware of this fact and you do keep up with the financial news online, you will probably remember reading many stories about the future of the pound during last year. I can remember reading several reports and opinions during the first half of 2008 which speculated that the pound might reach a low point of $1.50 in the months to come.

At the time, this was unbelievable. Who could possibly imagine that the pound – which on 22nd July 2008 had finished the day at $2.0060 to the pound – could dip that far down?

Some might have read that story and worried that it could indeed happen… and then spent the next few months watching alarmingly as the pound did start to dip lower and lower. Others may have read the opinions and dismissed them out of hand. And needless to say, in this last situation those people are now firmly eating their hats.

So it would appear that those experts were indeed right. And in fact as things have turned out they were more right than even they could have guessed. The low point was 1.4471 on the 30th of the month.

But the real question is what are the experts saying now? What events could we be looking at in the future? They got it right before, so if they say what will happen to the pound next, aren't we more likely to listen rather than dismiss them as easily as we did before?

It was the case that towards the end of last year, some experts were speculating about the possibility of the British pound sinking as low as $1.25 US dollars. Now the first reaction to this would be to look at the current exchange rates and figures that your currency converter is giving you, and to pooh pooh the idea. But some of us did that before didn't we, when we were at $2.00 per pound and looking at $1.50.

So could it happen? Indeed it could – after all, the situation has got markedly worse in the UK since those speculative ideas came to light. But that isn't to say it definitely will; it is just one path that could be taken.

But even if the pound does go that low against the dollar, the general consensus seems to be that by the end of 2009 it will be on its way back up again. That is a long way off, to be sure, but there will be a lot of events occurring between now and then. And when we are standing there on New Year's Eve 2009, we may well look back and see that the pound started reversing its fortunes in the year we are about to say goodbye to.

And if that happens, then we will be on the road to recovery.