Pound Very Troubled

The British Pound has probably suffered the most of any major currency during the ongoing global financial crisis. The Pound has fallen 35% against the US dollar, 51% against the Japanese Yen, and 44% against the Euro on Interbank Forex markets. Interbank Forex brokers report that the troubled Euro has fallen 32% against the Japanese Yen, 19% against the US dollar and

Health of British Banking Sector Questioned

Recent economic data from the UK and interest rate uncertainties are, in large part, responsible for the Pound’s poor performance on interbank Forex markets. Many interbank Forex brokers question the overall health of the British banking sector and data shows the UK in a more severe recession than was previously thought. The Bank of England has been faster and more aggressive than its European counterpart in addressing the Economy and interest rates but is far behind the actions taken by the US Federal Reserve.

Rates To Fall Further

Even though the Bank of England’s rates are at a 300 year low at 1.5% most interbank forex brokers expect rates to fall even further. Gross Domestic Product shrank 1.5% in 2008 the largest fall since 1980. Unemployment is at its highest since 1997 and stands at 6.1%. Manufacturing output shrank to 6.9%, and Industrial output declined 7.4%. It has also been reported that consumer spending and confidence are declining further.

Nationalization Possible

In the UK the financial services industry represents a large part of the overall British economy and this includes the interbank forex market. While the government does not mention bank nationalization recent actions have caused banks to become more dependent on government rescue packages and the government now owns large stakes in the nation’s banks. If and when the recession ends it is thought that a nationalized banking system will not be as profitable as privately run banks and will provide fewer jobs.

Upcoming Elections Could Affect Pound

Another major factor affecting the Pound on interbank forex markets is the upcoming national elections. Prime Minister Gordon Brown’s Labour Party is falling behind in national polls. In western countries the state of the national economy can easily determine election results. It is expected that the Labour government will do everything within its power to stimulate the economy but some of these actions could hurt the Pound on interbank Forex markets.

Currency markets have been volatile resulting in turmoil in currency markets including the interbank forex. As of late interbank forex brokers have had an unenviable job of coping with these constantly changing conditions.