Where Next for GBP/USD?
Sterling has recently suffered a particularly brutal time against the US dollar, devaluing some 13% since last summer.
Nine successive days of falls in early September means sterling is now at a 12-year low against a basket of currencies [1] and at a fresh two-and-a-half year low against the dollar, yet there is speculation among some analysts that the pound has even more downside left.
In the first week of September the UK currency fell against the dollar to below $1.77 for the first time since April 2006, while the British economy continues to deteriorate rapidly. With the struggling housing market putting more pressure on the Bank of England to cut interest rates before the end of the year, confidence in sterling is continuing to weaken.
With the pound rallying briefly against the dollar ahead of the Bank's base rate announcement on 4 September 2008 there may yet be some pockets of upside for traders, although falling oil prices boosting the dollar and the continuing weakness of the UK economy suggests sterling has yet to bottom.
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Source: [1] Reuters 4 September 2008
Updated: 04/09/08