Senin, 30 April 2012

Sterling hits 22-month high against euro as anxiety grows over Spain

Sterling hits 22-month high against euro as anxiety grows over Spain

By Hugo Duncan

PUBLISHED: 16:27 EST, 30 April 2012 | UPDATED: 16:27 EST, 30 April 2012

Sterling hit a 22-month high against the euro yesterday as the deepening crisis in Spain fuelled fears about the ailing single currency.

The pound was also at an eight-month high against the US dollar as investors continued to view the UK currency as a safe bet despite the double- dip recession.

But experts warned that the recent gains on the foreign exchange markets could dampen exports and further delay the economic recovery.

Currency wars: Pound hit a 22-month high against the ailing single currency

Currency wars: Pound hit a 22-month high against the ailing single currency

'Sterling’s rise is not really a vote of confidence in the UK economy,' said Michael Saunders, UK economist at banking giant Citigroup. ‘Sterling’s rise mainly reflects a lack of confidence in the euro. Although the UK economy is weak, the euro is doing worse.’

The report by Saunders, titled UK â€" Perils Of A Rising Pound, added: ‘On balance, we believe that at present a significant rise in sterling could do more harm than good for the UK economy.’

The pound rose as high as $1.63 and €1.23 before easing. It hit a 32-month against a basket of currencies from around the world, according to the Bank of England.

It came after figures in Madrid showed the Spanish economy is in recession for the second time in two years. Output fell 0.3 per cent in the first quarter of the year following a similar decline in the final three months of last year.

Britain has also suffered a double-dip but the outlook is reckoned to be worse in the eurozone with both Italy and Spain â€" the third and fourth biggest economies in the single currency bloc â€" set for a prolonged slump.

Unemployment is Spain is at a record high with one in four people out of work, including half of youngsters under 25.

Ratings agency Standard Poor’s added to the gloom by downgrading 11 of Spain’s biggest banks as Madrid discussed setting up a bad bank in a desperate bid to prevent a bailout.

The Spanish government is considering setting up a fund so banks can get rid of their toxic loans â€" freeing them up to lend to households and businesses.

‘The wheels are very clearly coming off the Spanish economy,’ said David Owen, an economist at investment bank Jefferies.

But Lee Hardman, currency strategist at Japanese bank BTM-UFJ, said: ‘It makes sense that the pound has performed relatively well of late, but it appears to be overshooting now, particularly as the UK is still in recession.

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It will at least reduce the effect of inflation, as we predominantly import. Fingers crossed, this could be the best thing for the economy (more disposable income).This might just improve GDP.

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Until the Chinese float their currency on the worlds markets every thing else is speculation.Lets have some opinion on them from the rating agencies if they dare.

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We need to devalue our pound it is too strong against the euro but has more to go against the greenback

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But the UK has just entered a double-dip recession!!!!!! I thought WE were doomed.

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