Pound Dollar Exchange Rates - GBP USD Eyes New 16-Month Low as Pound Sterling Weakens on Bank of England Comments

December 2, 2011 - Written by John Cameron

STORY LINK Pound Dollar Exchange Rates - GBP USD Eyes New 16-Month Low as Pound Sterling Weakens on Bank of England Comments

The Pound Euro exchange rate (GBP EUR) is 1.1644. The Pound Dollar exchange rate (GBP USD) is 1.5692. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5296.

The surge forward in global equities markets, which followed Wednesday’s announcement by six leading central banks that they were set to intervene into the currency market in order to make the US Dollar more freely available to institutional investors, ran out of momentum yesterday.

Speculation mounted throughout the day that there was more to the unified action by the central banks than had previously been suspected. Some economists suggested that the move had been an emergency action necessitated by a short term funding crisis in one or more major states. There was even talk in the aftermath of the announcement that a ‘Lehman moment’ had been averted.

Fears over the precarious state of the global economy were raised by apocalyptic comments from several policy-makers during the session. The Bank of England’s Governor Mervyn King led the way soon after the start of yesterday’s European session, when he warned that the world was facing an ‘extraordinarily serious and threatening’ economic situation. He went on to state that the UK’s central bank was formulating ‘contingency plans’ in order to deal with a potential break-up of the Eurozone.

The mood of doom was added to by Frnch President, Nicolas Sarkozy, last night, when he warned that the Eurozone needed to be ‘refounded’ in order to ensure stability for the region, moving forward. This led to speculation that the region’s leading economic powers, France and Germany, are planning to jettison their economically unstable southern partners in order to safeguard their own future.

The GBP USD made a run at the 1.5800 level late on Wednesday, as appetite for risk improved following the central banks’ announcement. However, the pair has re-established itself in the 1.56s overnight. If the mood of gloom continues to gather, then October’s 16-month low of 1.5272 will hove into view.


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