GBP (British Pound)

[millionairemind]

Sterling sell-off intensifies as investors turn their backs on Britain
By Edmund Conway, Economics Editor”
Last Updated: 6:51am BST 02/09/2008

The pound's slump accelerated for a second day in London as traders abandoned British investments following Alistair Darling's warning that the economy is facing its worst threat for 60 years.

After dropping below the $1.80 mark for the first time in more than two years yesterday, the pound lost another cent against the greenback within the first 30 minutes of the foreign-exchange markets opening in London today to trade just above $1.79. The pound was also weaker against the euro, with one euro worth 81.37p.

The slump leaves the pound worth the least - against a basket of world currencies - in 12 years.

The dramatic sell-off comes after the Chancellor remarks about the state of the economy over the weekend. Mr Darling warned that the threats facing the world economy were "arguably the worst they've been in 60 years... and I think it's going to be more profound and long-lasting than people thought".

The warning sparked a major sell-off in the foreign exchange markets, which was compounded by fresh news that the housing market's slump is still worsening and that the wider economy is threatening to dip into recession.

The pound has fallen sharply in recent months, as investors bet on the UK economy suffering a major slowdown and that the Bank of England will at some point have to cut interest rates sharply.

The dollar has also been strengthening against other world currencies.

Economists said that the Chancellor's warning could contribute to the economic slowdown by denting confidence and driving away investors.

Conservative leader David Cameron said: "It's an extraordinary situation that we've got a Chancellor of the Exchequer effectively talking the economy right down."

[millionairemind]

Sterling's slump deepens as recession looms
By Edmund Conway, Economics Editor
Last Updated: 7:51am BST 03/09/2008

Labour's sterling crisis is intensifying with the pound slumping to a new 16-year low.

The fall was triggered by an OECD warning that Britain is already in recession and the Government's pledge to spend £600m bailing out the housing market.

The pound, which has been tumbling in the past month, dropped to a new record low against the euro and hit a 2½-year low against the dollar as traders continued to sell out of their sterling investments.

In early morning trading today it almost fell to $1.77 and was at 81.42p against the euro. The declines took sterling to 88.5 against a basket of other currencies - the worst overall level since the aftermath of Black Wednesday in 1992.

The falls came after the Organisation for Economic Co-operation and Development warned yesterday that Britain is in the first throes of recession. The Paris-based OECD became the first major forecaster to declare explicitly that Britain is in a technical recession - where the economy contracts for two consecutive quarters.

To make matters even more uncomfortable for Gordon Brown, it said Britain is the only major economy facing recession in the next six months. The Prime Minister had claimed previously that the UK was well placed to withstand the downturn.

The OECD said the economy will shrink by 0.2pc by the end of the year - the worst performance since the recession of the early 1990s.

The OECD report came as a jobs specialist warned that the labour market is now deteriorating dramatically. The survey from the Recruitment and Employment Confederation and accountant KPMG showed that the number of permanent jobs available has fallen at the sharpest rate since November 2001.

Investors have abandoned the pound in recent months, fearing that the scale of the economic downturn will force the Bank of England to cut interest rates sharply and that the Government may react by cutting taxes and borrowing more, thus further debasing sterling.

With the first of these fears apparently confirmed by the OECD's assessment, the second was underlined yesterday as the Chancellor announced a suspension of stamp duty for certain households, threatening to push the Budget deficit higher.

David Page, UK economist at Investec, said Alistair Darling now looked likely to break both of his borrowing rules, while experts at Barclays Capital warned that the Treasury would have to borrow around £50bn both this year and the next, even without further discretionary tax cuts.

The Chancellor, who admitted over the weekend that the pressures on the economy are the worst for 60 years, will be forced to make the biggest downgrade to a Treasury growth forecast in 16 years this autumn.

Mr Darling has privately acknowledged that he will have to cut his forecast for 2009 from 2.5pc to as low as 1pc. The OECD said it expected the economy to grow by just 1.2pc over all of 2008.

[-dol-]

Things certainly not looking good for my meagre Sterling pounds

How many times have we hang onto a soured position just because it is too small?
Well, it's not even an investment in my case. Just a leftover from my backpacking days...

[millionairemind]

Pound suffers biggest fall since Black Wednesday
The pound suffered its biggest fall since the aftermath of Black Wednesday in 1992 after the Prime Minister and Governor of the Bank of England warned that the UK is entering a recession.

By Edmund Conway, Economics Editor
Last Updated: 5:37AM BST 23 Oct 2008

Sterling plummeted by almost 6¼ cents against the dollar as investors abandoned the UK currency after the warning, originally delivered by Mervyn King on Tuesday night. The pound ended the day worth just $1.6334, compared with almost $1.70 the previous close.

It also fell sharply against a host of other currencies, tumbling 2.3pc against a trade-weighted basket of other currencies. Both are the biggest one-day falls since sterling crashed in September 1992 after being ejected from the European Exchange Rate Mechanism, and it leaves the pound at a five-year low against the dollar.

Mr King warned in his speech that the pound could face a "larger and faster" adjustment in the coming months as the UK economy is forced to adapt to the new post-financial crisis landscape. He warned that the UK was facing a similar situation to the Asian economies in the late 1990s as foreign investors pull out their capital from the country.

Experts warned that the pound will fall still further in the coming months as the Bank of England slashes interest rates again. The majority of economists polled by Reuters predicted that the Bank will cut borrowing costs by a further half a percentage point to 4pc next month. Most now see rates falling to 3pc or below by next summer. Capital Economics analysts predicted that sterling would drop down to $1.50 against the dollar in the coming months.

Mr King's comments prompted JP Morgan economist Malcolm Barr to say: "With sterling falling sharply in recent days, it is tempting to see this as central banker who sees the possibility for a further marked fall, but is not inclined to do much about it."

Sterling's fall came on a volatile day for foreign exchange. The dollar rose sharply higher as investors returned to the greenback, and hedge funds sold assets in return for dollars.

In his speech in Leeds on Tuesday night, Mr King said: "It now seems likely that the UK economy is entering a recession."

He added: "It is surely probable that the drama of the banking crisis, which is unprecedented in the lifetime of almost all of us, will damage business and consumer confidence more generally."

Since the Bank is currently in the middle of its quarterly forecasting round, analysts said the comments were doubly significant, shining a light on the tone of the Monetary Policy Committee's forthcoming Inflation Report, due early next month.

The pound sell-off continued after minutes from the Bank's emergency interest rate meeting earlier this month revealed that the MPC voted unanimously for a cut. The Bank's own survey also showed that consumer spending on a range of products had become "significantly negative" in September. The Agents' Survey showed that consumers are tending to switch to unbranded products and discounted outlets in an effort to save money.

[millionairemind]

So the problem started in the US, but UK is crapping out faster..

Sterling tumbles as 'currency market tsunami' sweeps markets
Sterling tumbled another two cents against the dollar on Monday and weakened against the euro as traders speculated the Bank of England may deliver an emergency cut in interest rates and as investors poured money into the dollar.

By Rosie Murray-West and Jamie Dunkley
Last Updated: 7:49AM GMT 27 Oct 2008

The pound fell to almost $1.56 in early trading and slid to almost 80p versus Europe's common currency as what one expert called a "currency market tsunami" continued to sweep the foreign-exchange markets.

The weakness in sterling leaves the currency 13pc lower against the dollar this month alone as expectations that the UK economy is now facing a severe recession becomes the mainstream view. News on Friday the economy contracted 0.5pc in the three months to September sent the currency tumbling almost 9 cents at one point.

Bob Munro, senior consultant at currency experts HiFX, said that the dollar’s strength against the pound would continue as hedge funds liquidated assets in emerging markets and kept the money in cash.

He said: “Most of these hedge funds are dollar-denominated and so money is pouring into the dollar.” Munro added: “This is not a vote of confidence in the US economy, more a technical move as people get out of anything risky.

“There is a currency market tsunami washing over everything, and we will have to wait until the waves recede to see what’s left,” he said.

The increasingly bleak news from the economy is putting pressure on the Bank of England to cut interest rates before its schedule meeting next month.

Dr Lyons, chief economist at Standard Chartered, said: “The economic data available to us shows that the UK economy is crying out for a further cut in the rate of interest. Mervyn King’s comments last week suggest that the Bank of England will do that at its next meeting, but I think action needs to be taken immediately.

However he added: “I don’t expect this to happen, though, and think we will need to wait until the Monetary Policy Committee’s next meeting in November.”

[millionairemind]

Published December 30, 2008

Sterling sinks to new low against euro

(TOKYO) Sterling hit a record low against the euro yesterday, hurt by its yield disadvantage against the single European currency and inching closer to parity.

A bleak outlook for the UK economy and expectations that eurozone interest rates are likely to stay higher than British rates in the coming months pushed sterling lower. 'The trend of weakness in sterling is likely to continue for a while longer,' said an analyst for a Japanese foreign exchange broker.

Sterling's fall against the euro gained momentum after some stop-loss sales at levels near 96 pence were triggered, said a trader for a European bank. If it hits parity against the euro, that would be the first time since the single European currency's launch in 1999.

A trader at another European bank cited hedge-fund buying of euros against sterling, as well as buying of euros versus the dollar by Middle Eastern players.

Sterling fell as low as 96.59 pence, a record low against the euro, but later trimmed some losses to stand at 96.39 pence, down 0.2 per cent from late US trading on Friday.

Amid thin year-end trade, the euro rose 0.9 per cent against the dollar to US$1.4154. 'Some people may prefer to park funds in euros rather than dollars ahead of the year-end, but I don't get the sense that there is any major portfolio shift taking place,' said a trader for a Japanese bank, referring to the euro's rise on Friday. Some market participants also noted that there was caution about potential speculative moves in light trade.

The dollar fell broadly, especially against the Swiss franc, which rose on safe-haven buying as Israeli warplanes pounded the Hamas-ruled Gaza Strip for a third consecutive day yesterday. The dollar declined 0.8 per cent against the Swiss franc to 1.0590 francs. It dipped 0.3 per cent against the yen to 90.52 yen and also retreated versus sterling, falling 0.6 per cent to US$1.4666.

Some market participants said gains in the Swiss franc may not last long as investors shift their focus to near zero interest rates in Switzerland.

The trader for a Japanese bank said the dollar's fall may be a sign of things to come in 2009. 'There is the vague sense that the broad trend is towards dollar weakness,' the trader said, adding that lingering uncertainty about the fate of US 'Big Three' automakers and the health of the US financial sector could work against the dollar. The dollar index, which measures the dollar's value against a basket of major currencies, has risen 5 per cent for the year. But it has fallen 6.9 per cent in December, the steepest monthly fall since its 7 per cent drop in March 1985. -- Reuters

[millionairemind]

More bailouts to come, so keep selling sterling


Hmm. I'm not sure that Gordon Brown got the result he hoped for yesterday.

After the first Great British banking bail-out, Mr Brown thought he had saved the global banking system – the "world", no less. And plenty of pundits were happy to indulge his fantasies.

But yesterday, the Great British Banking Bail-out (GBBBO) Mark II revealed that he hadn't even saved the UK's banks. £37bn of real money (as opposed to promises or guarantees, we're talking cash that's been spent) later, and the economy's still in deep trouble and we're no closer to knowing just how bankrupt the banks actually are.

The markets now seem to expect that a GBBBO Mk III, involving large-scale nationalisation, is just around the corner. But can we afford it?
Uncertainty means investors will plan for meltdown

Royal Bank of Scotland's (LON:RBS) share price demonstrated just how impressed the markets were with Gordon Brown's new bail-out plan. It dived by more than 60%. The bank's market capitalisation is now just £4.5bn, compared to £78bn a year and a half ago. Investors, realising that the Government is now on course to own 70% of the bank, are almost pricing in full-blown nationalisation.

The trouble with the new bail-out, with all its fiddling about with insurance and guarantee schemes, is that we're no nearer to knowing just how much dross is on banks' balance sheets. Until investors know what the worst-case scenario actually is, they'll plan for a meltdown, and rightly so. Barclays (LON:BARC), for example, which is doing its very best to remain free of government control, saw its shares take another pasting yesterday. The bank says its profits for 2008 will be "well ahead" of forecasts but the trouble is, no one believes it.

There's a fear that it still has a lot of dodgy assets on its balance sheet, and that if it's forced to take a long, hard look at these by the Government, then we'll see hefty write downs.

The longer the uncertainty continues, the longer it'll be before markets can be sure that a floor has been reached. As CLSA's Christopher Wood points out in the FT this morning, "the ultimate endgame in countries such as the US and Britain is still likely to be full-scale nationalisation of the banking system," but it would be better done sooner rather than later, "since it would accelerate resolution of the financial crisis."
Bank of England to start printing money

The other big news was that the door has been opened wide for the Bank of England to embark on quantitative easing (that's Bank-speak for "printing money"). The Bank will get £50bn to buy assets such as corporate bonds. The idea is that by buying corporate debt, it will drive down yields (yields fall as prices rise) and so cut the cost of borrowing for companies.

It also means, of course, that the Bank is on the hook if its purchases go bad. But while an ordinary investor would lose money in that situation, all that will happen with the Bank is that the Treasury – ie the taxpayer – will cover it. Spending other people's money, with no comeback if you lose it, is not a great incentive to do proper due diligence – just ask anyone whose asset manager gave their money to Bernie Madoff.
Full story
http://www.moneyweek.com/news-and-chart ... 14499.aspx

[winston]

Risks of shorting sterling rise below $1.40: Soros

DAVOS, Switzerland (Reuters) - The risks of holding trading positions that assume further declines in sterling increase significantly when the currency falls below $1.40, hedge fund manager George Soros said on Wednesday.

He said he had shorted the currency, which plunged to multi-year lows last week and touched $1.34. But now he sees the outlook for sterling as neutral.

"I did foresee the fall in sterling," said Soros, chairman of Soros Fund Management. "But below $1.40, it seems to me the risks involved have changed."

"While we did have short positions in sterling, I am no longer bearish on the pound today. But that doesn't mean I am bullish either. It will just fluctuate around here for some time."

Sterling was trading around $1.420 at 8 a.m. EST on Wednesday.

[winston]

Bloomberg: Britain Currency to Crumble By: Elaine Barr

Harvard professor Niall Ferguson sees the handwriting on the wall with Britain's currency, and he doesnt like what he sees.

The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one, the British financial historian told Bloomberg Markets.

The deterioration of the U.K.'s public finances already has prompted Standard & Poor to warn on May 21 that the country could lose its AAA rating.

Another ominous sign: Chancellor of the Exchequer Alistair Darling said the government's 2009 deficit would hit 12.4 percent of GDP.

Nigel Lawson, former chancellor of the Exchequer under Margaret Thatcher from 1983 to 1989, agreed with Fergueson's outlook. He said Britons can expect to face spending cuts in coming years in all areas, including Social Security and healthcare.

Our public finances are easily the worst we've ever had in peacetime. The amount of borrowing the government will have to do as a result of the deficit is very worrying, Lawson said.

Andrew Bosomworth of Pacific Investment Management Co. goes even further with his prediction. In a worst-case scenario, there could be a run on the currency.

To head off a crisis, Lawson urged Britain's next leaders to make deep cuts in government spending right away.

Ferguson sees no alternative to severe cuts.

It has to happen. This kind of red ink implies both spending cuts and tax hikes that could make the 1980s look like a teddy bear's picnic,he said.

© 2009 Newsmax.

[HengHeng]

Frankly speaking look at which developed country is not crumbling .. LOL

all got overinflated budget deficits ...

Japan even worse ... Japan face aging population ( which meants it only need more and more money )

but lower and lower productivity due to aging .. dunno how they die in the next ten years .. LOL


As for the rest , i dunno lah .. i'm not a leader of any nation to come out with billiant ideas .. LOL but i think lah .. UK not the worse .. Last but not least .. i think US is actually in good hands..