Pound Sterling drops on comment by former UK Treasury Adviser

Pound Sterling drops on comment by former UK Treasury Adviser

04-27-2009 15:43

Former UK Treasury Adviser Roger Bootle declared that it is possible that the national economy will face a contraction as house prices decrease. On this comment the Pound fell and started this week rather gloomy while the Japanese Yen regained its safe-haven status as the potential ‘swine flu’ pandemic increases risk aversion.

Investors lose confidence in UK economy

The Pound weakened versus the Dollar, Euro and Swiss Franc due to various causes. Investors lost confidence in the British economy as the Hometrack Ltd. report proved that the real estate prices declined for the 19th consecutive month. The Swiss Franc and the Japanese Yen are considered as safer investments for times of uncertainty. Therefore these currencies went up against the British Pound as concerns increase that the ‘swine pig’ could spread to Europe. The comment by Roger Bootle added to the already obviously difficult circumstances in Britain.

Rapid contraction British economy

The UK deterioration is worse than expected and according to analysts the market was not prepared for such a swift deterioration in almost every segment of the UK economy. The current situation features banking institutions revealing negative reports continually and major job losses. The Pound faced the results of the internal problems in Britain and market participants believe that record low levels will be broken during the next months.