Sterling suffers fresh battering
Saturday 27 May 1995
Neil Mackinnon, chief currency strategist at Citibank, said the latest fall in the pound was another manifestation of "sterling's well known political sensitivity". Earlier this month, the Bank of England revealed that foreign investors had made large net sales of gilts in the first quarter of the year, "with some investors deterred by what they saw as increased political uncertainty".
The pound has now retraced most of the gains it made this month after hitting lows in the aftermath of the Chancellor's decision not to raise interest rates.
It is approaching once again its previous lows of 2.1765 against the mark and 82.7 on the trade-weighted index on 9 May. Mr Mackinnon is forecasting that the pound will fall to 2DM by the end of the year.
As before this year, the pound has been caught in the slipstream of a weakening dollar. The rally in the dollar this month has proven short- lived. Since Wednesday it has fallen by four yen and by six pfennig against the mark.
The immediate reasons cited by dealers for the renewed bearish sentiment against the dollar are new signs that the US economy is slowing down more than expected. Two-year bond yields slipped below the Federal Funds rate this week, indicating that the market is now discounting a cut in US interest rates.
However, the scale and swiftness of the setback to the long-awaited rally suggests that long-term concerns about the dollar remain prominent in investors' minds. These include worries about the US slide into foreign indebtedness and the possibility that foreign holders of dollars are anxious to diversify out of the greenback.
The markets will now be looking closely at US figures in the coming week to see if the run of weak economic data continues. Particular attention will be paid to the consumer confidence index, the national purchasing managers index and the employment report at the end of the week.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits record low as popularity suffers in wake of Ukip sex scandal
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Germany sees 'visible rise' in support for far-right extremism in response to perceived 'Islamisation' of the West
iJobs Money & Business
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...