Pound-dollar rate

Backbiter

It's dropped 7 cents in the last few days. Apparently the currency speculators are 'betting on a UK interest rate cut in the near future'. Great news if you have a mortgage, not if you are off to the States. Get your dollars now! (And never take my advice - I paid for my Cruise with a US agent last summer, with the balance due this coming week. I emailed the agent last weekend arranging to pay on Tuesday. At the time the rate was $1.91 and rising!!). Oh well - I sould make up the difference when my mortgage comes down.

mystic_trev

The next move for UK Interest rates is likely to be UP not down.

loates123

yes agree why did u think that backbiter

pin

I'm afraid none of know what way rates are going to go, only the monetary policy committee knows.

Backbiter

loates123 wrote:

yes agree why did u think that backbiter

I'm just passing on what I've read. The Times forecast a rate cut earlier this week, and all I said in my original post is that dealers are selling pounds because they think that rates won't rise and could well fall, as a rate rise would badly damage the UK economy. The Times website is playing up so I can't post a link, but here are some related articles:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/05/13/cnlow13.xml

"The pound yesterday sank to a 6½ week low against the dollar and has now lost four cents in the past six trading days.

Sterling has suffered from an impression that the Bank of England is unlikely to raise interest rates in the near-term, and from a slew of good economic reports out of the United States. The pound fell to $1.8639 and to 0.6820 cents against the euro.

The currency team at HSBC said it was "the beginning of the end" for sterling"

http://www.bloomberg.com/apps/news?pid=10000102&sid=au07TYSieUCM&refer=uk
The pound posted its third consecutive weekly drop against the dollar as evidence the U.K. economy is slowing cements the view interest rates have peaked.

The Bank of England on May 11 cut its growth forecast for the U.K. this year as reports showed retail sales fell in April, manufacturing contracted and the property market in Europe's second-largest economy cooled further.

``What we are seeing in economic development, activity data is slowing quite remarkably,'' said Adrian Hughes, a currency strategist at HSBC Holdings Plc in London. ``We have been banging the bearish drum for some time for sterling.''

Against the dollar, the pound dropped to $1.8506 in London from $1.8926 on May 6. The U.K. currency recorded its third straight week of declines against the dollar for the first time this year.

Signs growth is waning has prompted traders to unwind expectations the central bank will push the main rate higher than 4.75 percent. They lifted rates from 3.5 percent to 4.75 percent in the 10 months through August.

U.K. interest-rate futures dropped to the lowest in at least a year after the bank's release of its forecasts on May 10. The rate on the futures contract due in December has fallen 15 basis points, or 0.17 percentage point, to 4.63 percent this week.

Futures contracts settle to the three-month U.K. London interbank offered rate, or Libor, which since 1987 has averaged about 14 basis points above the central bank's key interest rate.

A willingness to buy the pound against the dollar was also dented after a report on May 10 showed the U.S. trade deficit unexpectedly narrowed in March, according to Christensen.

Gap Narrows

While the Bank of England has kept its benchmark rate at 4.75 percent since August, the Federal Reserve has raised its equivalent rate from 1 percent in June to 3 percent, narrowing the yield advantage for the U.K. currency.

Led by Mervyn King, the central bank's rate is 2.75 percentage points higher than the European Central Bank's key rate. The ECB has kept its rate at 2 percent since June 2003 as growth in the region's $10 trillion economy fails to pick up.

The pound stayed lower against the dollar after the University of Michigan's preliminary index of consumer sentiment fell to 85.3 from 87.7 in April. A reading of 88.2 was forecast for the month, according to the median estimate in a Bloomberg News survey of economists. "