The British Pound Is More At Risk Than the Buck
Jul 31st, 2008 | By Jack Crooks | Category: Featured, Financial NewsWhile investors fret about the death of the US dollar, forex expert Jack Crooks says there is one currency in even more trouble than the buck: the British pound.
Britain is following the US into a slump, preventing the Bank of England (BoE) from hiking rates to control inflation.
Jack says Britain is more exposed to the ongoing credit crisis than any other major economy… including the US.
The next BoE move could another rate cut. This would send the British pound tumbling…
I believe the British economy is more exposed to this ongoing credit crisis than any other major developed economy in the world… even more than the United States.
A report came out yesterday morning that showed the U.K. CBI retail sales index dropped to its lowest level in more than 25 years. And like clockwork this bit of information sent the British pound tumbling. It didn’t help that earlier in the London session U.K. mortgage approvals for the month of June came in weaker than expected.
The previous couple of months haven’t been kind to the U.K. either.
- Last week we learned that actual retail sales fell by 3.9% – the most in 22 years. That’s on top of the dismal CBI retail sales index figures released yesterday morning.
- The average home price dropped 6.4% from May to June.
- And before yesterday morning’s report, we already knew that mortgage approvals fell by 40.5% from April to June.
- The ratio of Residential Mortgage Backed Securities (the consumers’ primary funding vehicle for houses) to GDP for the U.K. is over 7% – easily the highest of any developed nation.
Boy oh boy the credit crisis really has complicated things. Considering the myriad of economic problems, the Bank of England (BOE) is only delaying the inevitable at this point. The economic conditions in the U.K. are starting to take precedence over the inflation risks, if they haven’t already.
Interest rate hikes have been wiped clean off the table for the foreseeable future. And the U.K. is playing catch-up to the U.S. – trudging their way towards a cyclical trough.
It’s my contention that the next policy adjustment for the Bank of England will be a rate cut. And that could even come before the end of the year. With a rate cut on the horizon, British pound adjustment will continue to be made on the downside.
Source: Forget the Buck, There’s a New Currency to Hate in 2008
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Jack Crooks is editor of World Currency Options, and a contributor to the World Currency Watch blog. Jack is a seasoned investment adviser, who has held key positions in brokerage, money management, trading, and research. He is the founder of Black Swan Capital, a currency advisory and management firm, and of Ross International Asset Management.
