The British Pound (GBP) is still undergoing a tumultuous time of instability with a series of plunges that are overwhelming the British economy. All across the globe, investors have been asking: “When will it end?”
The British Pound was only just beginning to find stability and strength, but, things have changed rapidly. The Australian Dollar is probably doing better as it is no longer reeling from the European Economic Crisis, China has been strengthening its economy, the US Dollar is continuing to strengthen, and the Euro is suffering through a few problems.
This exchange rate volatility has impacted all countries equally, whether you are an investor retailer, or a consumer. The rise in the price of the UK’s currency means that today’s purchase price is much more expensive than what it was the day before. As the economy recovers and prices stabilize, the British Pound is likely to continue on a downward trend.
Other currencies, such as the Canadian Dollar and the Swiss Franc, have also suffered dramatically and are not doing as well as the GBP. The Canadian Dollar has seen some fluctuation over the past few weeks, but it is continuing to edge up at a steady pace. The Swiss Franc has been weaker than many others, but it is expected to continue on an upward trend.
The Bank of England has reported that the financial markets are unlikely to face any significant challenges until after the Budget in mid-February. Traders are forecasting that the Bank of England will meet its forecast for further interest rate increases this month.
Investors are expecting that the British Government is going to announce more spending cuts to ease the burden on the public purse. Many expect that the Budget may fall short of forecasts and, as a result, there will be further turmoil for the British Pound. Forecasts from professional forecasters will continue to point to further depreciation in the British Pound.
With higher interest rates and a reduced budget, this should help to stop the British economy from falling further into recession. In fact, the Bank of England does not expect the British economy to be in recession for another six months. After this, the rate of unemployment will continue to rise, but, not as quickly as it has increased over the past couple of years.
With more spending cuts to come, there is a greater likelihood that consumers will continue to pull back on their purchases and many firms will be forced to lay off staff, putting less money in customers’ pockets. This is a major concern for investors as the last thing they want is for their money to be wasted.
The fact that the European Economic Crisis has had a devastating effect on credit and spending in the UK, it is hard to believe that these factors will not begin to affect the Bank of England, banks, and consumers. Since so many businesses in the UK rely on huge amounts of credit to remain profitable, this is the last thing that investors want to see happen.
Another important factor in this battle for the fate of the British Pound is time. With interest rates being raised as soon as the Budget is announced, many consumers will be delaying purchases until the rates start to fall.
With any budget cuts, the individual or family may lose their ability to boost their bank balance and save up for future purchases. Investing in precious metals will ensure that you will have funds to make purchases when the time comes.
As the value of precious metals such as gold and silver increases, there is no reason why these currencies should not continue to grow in value over the coming months. When you combine this growth with a stable economy, the UK Pound can go down a lot further, but, this is only good news for those who have their investments in precious metals.