Pound falls to against the dollar

For the third consecutive day the pound has fallen against both the dollar and the euro which has fuelled the pessimism debate that has ensued surrounding whether the country is in a recession.

What the weakness of the pound has done though is provide the Bank of England with even more reasons why they need to reduce interest rates further.

According to the European Commission, the UK economy will contract 1 percent through to 2009 and even if policymakers do reduce the benchmark interest rate by 0.5 percent to 4 percent it is still likely to be a struggle for the next 16 months with the outlook still bleak.

The pound has thus far fallen to $1.5777 dropping from $1.5818 yesterday as it faltered against both the euro and yen.

Analysts predicted that, due to the vulnerable climate that we are in, aggressive rate cuts are needed in order for the economy to recover over the next year.

There is overwhelming evidence that the UK economy is already in recession as the pound has not fallen by so much since the previous recession back in 1990.

Parts of the economy have taken a real pounding with the construction industry leading the way neck first as the Chartered Institute of Purchasing and Supply’s index of construction declined to 35.1 in October down from 38.8 in September.

Story link: Pound falls to against the dollar