Sterling declines on less positive UK outlook

Sterling declines on less positive UK outlook

12-09-2009 06:54

The Pound Sterling dropped against the Single Currency and the Greenback due to the fact that the perspectives for the economies of the world’s wealthiest nations are still more optimistic than the outlook for the UK economy. This resulted in investors choosing higher-yielding currencies of faster improving economies instead of Pound priced investments.

Resilient versus resistant

Moody’s Investors Service published a report regarding the most wealthiest countries in the world that showed that the United Kingdom was rated as ‘resilient’ while major EU countries such as Germany and France were better rated as ‘resistant’. The Sterling declined further against the Common European Currency as it also tumbled against the US Dollar as a result of changing interest rate perspectives in the North American nation. In the meantime, there are rumors about a rate hike for the mid-term future that create a positive sentiment towards the Greenback against the majority of the 16 most popular currencies. After the UK economy seemed to improve , the recovery has been decelerating more than overseas countries such as emerging economies and commodity-based economies like the Australian and Canadian one, whose currencies have climbed constantly against the Sterling this year.

Sterling’s outlook

The Pound’s perspectives are still pessimistic due to investors preferring more-profitable assets when risk appetite dominates, as they opt for safe haven options in risk aversion fueled trading sessions, decreasing the attractiveness of Pound priced options. This gloomy situation is not expected to improve before the start of 2010.