THE INDEPENDENT: First property. Then shares. Now sterling is slumping. Sean O'Grady explains what the decline means for us
In July, £1 would still buy $2; lower than its recent record of $2.11 set last November, but healthy enough for shopping trips to New York to make sense. Yesterday, sterling was trading at about $1.48, a six-year low. Macy's and Sachs of Fifth Avenue may soon notice a sharp decline in the number of British accents at the tills.
Our currency has also been bouncing along the bottom against the euro, which is now worth about 84p, its highest since the single currency was launched in 1999.
Suddenly the idea of parity – £1 = €1 – hoves into view. Broadly speaking, sterling has had a more violent battering in recent months than it endured after it famously fell out of the European Exchange Rate Mechanism on "Black Wednesday", 16 September 1992. The pound has fallen 25 per cent against the dollar and 15 per cent versus the euro this year. It has, you might say, had a bit of a pounding.
The reasons for sterling's weakness are not difficult to see. To some extent, it is simply an adjustment to the way the pound has been overvalued for years: its fair value is about $1.50, according to the Organisation for Economic Co-operation and Development.
What's more, the UK is evidently headed for recession and the Bank of England is predicted to cut interest rates to historically low levels, maybe even below 1 per cent over the course of next year – the lowest level since the Bank was granted its charter in 1694. Such meagre prospective rewards for investors and the general belief that sterling assets have further to fall has prompted a sharp sell-off in the currency. >>> Sean O'Grady | November 14, 2008
THE TELEGRAPH: Europe Is in Recession after Bank Meltdown
Europe has fallen into its first recession in 15 years, after the global banking crisis and a decline in exports brought growth to a shuddering halt.
The Eurozone economy - made up of the 15 countries that use the euro - contracted by 0.2pc in the third quarter and it follows a 0.2pc fall in GDP in the second quarter.
The contraction underlines the escalation of the financial crisis that began in the US sub-prime mortgage market into a full-blown economic downturn. The Organisation for Economic Co-Operation and Development and the International Monetary Fund have both warned in the past two weeks that the US, Europe and Japan will also be in recession next year for the first time since World War II.
"The latest data and survey evidence indicate that the fourth quarter is likely to see a sharper fall in GDP as the financial crisis bites harder," said Howard Archer, chief economist at Global Insight. The European Central Bank is likely to slash rates from 3.75pc to 2pc by the middle of 2009, according to Mr Archer.
The move would represent a u-turn for the ECB's policy makers who in July increased rates to combat the threat of inflation. Inflation in the region slowed to 3.2pc in October from 3.6pc in September.
Germany, the biggest economy in Europe, confirmed yesterday it was in recession, with a 0.5pc contraction in GDP. The country has been hard hit because of its position as the world's largest exporter, as economies around globe slow. The UK and US economies both contracted in the third quarter. >>> By Amy Wilson | November 14, 2008
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