Outlook for the British Pound Not Looking Good
The economy in the United Kingdom is not recovering from last year’s global economic crises as quickly as other countries, as the British Pound continues to decline against other global currencies. In the past weeks, the Pound has shown a slump, declining against both the Euro and the Dollar, and will probably continue to decline in the coming weeks.
The Pound has exhibited a constant decline against the dollar for the last four weeks. Last week the GBP/USD opened at a rate of 1.6484 and closed at a rate of 1.6251. It is likely that over the coming week the rate will drop below $1.60 so traders may want to avoid buying Pounds until the rate starts going up. There is no telling when that will happen.
As the Pound continues to decline in value, economic forecasts also show a budget deficit for the UK that is higher than expected. Following this news, the Pound dropped even more against most of the other 6 major currencies traded on Forex. The Federal Reserve is likely to raise borrowing costs as well, with increased interest rates. This should result in the dollar climbing even higher in value versus the Pound.
An increased deficit in the UK and a decrease in value of the Pound will not affect the UK’s top credit rating. However, it could signal a losing streak for many British Pound investors.
