Afternoon:
9°c
Sterling resumed its downward path today amid warnings that although the global economy is on the mend the turnaround will be slow and painful.
The London stock market was also subdued as investors, nervous about the strength of the recovery, paused for breath following five months of gains.
The pound, perceived by many to be a more risky asset than other major currencies, was down 0.94 cents against the US dollar to $1.6465, and 0.42 cents lower against the euro to €1.1675. The FTSE 100 index was down 39.72 to 4646.06.
The moves came as the International Monetary Fund declared the global recovery is underway — but warned the downturn “has left deep scars” that will take years to heal.
IMF chief economist Olivier Blanchard said: “The recovery has started. Sustaining it will require delicate re-balancing acts, both within and across countries.
“The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come.”
Billionaire investor Warren Buffett also said the US economy is now out of the emergency room and on the slow path to recovery. “Our immediate problem is to get our country back on its feet and flourishing — whatever it takes' still makes sense,” he said.
However, the Berkshire Hathaway chief added that once the recovery is secure, the US must slash its debt levels to protect the dollar and the country's economic future.
“Enormous doses of monetary medicine continue to be administered, and before long we will need to deal with their side effects,” said Buffett. “Their threat may be as ominous as that posed by the financial crisis itself.”
Figures this week showed Japan followed France and Germany out of recession in the second quarter — fuelling hopes of a global recovery. But David Blanchflower, a former member of the Bank of England's monetary policy committee, said: “Be mindful that in the European Union, 20 countries are in recession.”
That includes the UK, where the economy contracted by 0.8% in the second quarter. The pound rallied through this period, but has been on a downward path since the Bank of England extended its quantitative easing programme by £50 billion to £175 billion two weeks ago.
The UK currency regained some ground yesterday after stronger-than-expected figures showed inflation remained at 1.8% in July, but the respite proved short-lived. The dollar and the euro have gained traction on hopes the US and eurozone could be among the first areas out of recession.
Reader views (2)
Double dip anyone ? !!!
- Andrew Nicholls, Ely ,England, 19/08/2009 11:56
Report abuse
The global recovery was never more than in traders minds anyway. They wanted to push the markets higher for their own personal agendas but the real world scenario remains as it was 6 months ago. A slow painful recovery which may still even get worse before it can get better!!
- Pl, London, England, 19/08/2009 09:50
Report abuse
