The UK pound has hit its highest level against the US dollar in 26 years.
The pound has gained on the perception that US interest rates will be cut this week, while UK interest rates will be left unchanged next week.
When UK rates are higher than US rates, investors are encouraged to exchange dollars for pounds to benefit from better rates of return.
At one point the pound touched $2.070, before paring gains to $2.067, while the dollar sank to a new euro low.
The last time the pound was at these sorts of levels was 5 November, 1980, when it reached $2.446.
Many analysts expect the Federal Reserve, the US central bank, to cut interest rates by a quarter of a percentage point on Wednesday, in an attempt to limit the impact of a housing market slowdown.
The Fed cut its main interest rate by half a percentage point to 4.75% from 5.25% last month, after problems in the housing market were seen to be spreading to the wider economy.
The move sent the greenback in a downward spiral against the euro, sliding to a new record low on Tuesday at $1.4444, its third record low in as many days.
Recession risks
House prices in the US have been falling and the number of foreclosures has surged in recent months after the Fed spent almost two years between 2004 and 2006 raising rates in an attempt to slow inflation.
While inflation fears have been simmering in previous months, mainly stoked by the surging oil price, many analysts now say that the biggest worry is consumers reining in their spending.
Should that happen, they argue, the US economy could splutter into a recession.
The pound has gained on the perception that US interest rates will be cut this week, while UK interest rates will be left unchanged next week.
When UK rates are higher than US rates, investors are encouraged to exchange dollars for pounds to benefit from better rates of return.
At one point the pound touched $2.070, before paring gains to $2.067, while the dollar sank to a new euro low.
The last time the pound was at these sorts of levels was 5 November, 1980, when it reached $2.446.
Many analysts expect the Federal Reserve, the US central bank, to cut interest rates by a quarter of a percentage point on Wednesday, in an attempt to limit the impact of a housing market slowdown.
The Fed cut its main interest rate by half a percentage point to 4.75% from 5.25% last month, after problems in the housing market were seen to be spreading to the wider economy.
The move sent the greenback in a downward spiral against the euro, sliding to a new record low on Tuesday at $1.4444, its third record low in as many days.
Recession risks
House prices in the US have been falling and the number of foreclosures has surged in recent months after the Fed spent almost two years between 2004 and 2006 raising rates in an attempt to slow inflation.
While inflation fears have been simmering in previous months, mainly stoked by the surging oil price, many analysts now say that the biggest worry is consumers reining in their spending.
Should that happen, they argue, the US economy could splutter into a recession.
Geen opmerkingen:
Een reactie posten