Monday, 12 January 2009

Look for pound recovery by holiday time!

We have seen the pound plummet in recent weeks, but it did show a minor recovery last week, reaching 1.127 euros and $1.52 by the end of the week. There didn't appear to be a huge adverse reaction to the lowering of interest rates by the Bank of England to 1.5%.

It may be that currency traders feel that the worst is over for the UK economy (or at least, it can't get much worse), whereas it could actually get worse for those in the eurozone. Several European economies are struggling, but the eurozone interest rate is at 2.5%. There is still room for it to come down.

If the eurozone interest rate comes down and the UK interest rate appears to be stabilising, it could be good news for the pound. We might not see a return to the level of £1=1.5 euros, the rate for so long beyond a couple of years back, but at least we might get more euros for our money come the time for our summer holidays!

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