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Sterling fell to a five-month low today but shares in London hit this year's high as investors bet interest rates will not go up until 2011.
The pound was down 0.31 cents against the US dollar to $1.5809 and 0.36 euro cents against the euro to 1.0721. The FTSE 100 index rose 61.58 to 5223.45.
It came after a report by the Centre for Economics and Business Research said rates could stay at the record low of 0.5% until 2011 and remain below 2% until 2014.
The report also predicted the Bank of England will ramp its quantitative easing programme — printing money — by £75 billion to £250 billion. This, said the CEBR, could send the pound as low as $1.40 against the greenback and possibly below parity with the euro.
Bank Governor Mervyn King has indicated he is happy for the pound to remain weak in the hope that it will drive exports and boost the economy.
Reader views (5)
Comparing the pound to the US dollar is stupid. The dollar has only one way to go and that is down. How about comparing it to the Yuan or Yen? The pound was a lot lower against the dollar in the past. However, theUS dollar is a spent force and will never be higher than 1.50 to the pound after 2010. Then what? The UK owned by the Chinese?
- Coylum, vancouver, Canada
The Prime Minister is placing future generations under a real debt obligation. All this printing money (£75 billion to £250 billion) will just delay the free market from adjusting. The truth is the P-M cannot face making the very necessary public sector cuts and tax increases. So much for an Independent Bank of England from Party Politics, just how clever is this Policy?
- Andrew, London
Well if Cameron were elected I suppose the good times of 18% interest rates will return!! Lubbly Jubbly for savers.
- Melvyn Windebank, Canvey Island, Essex
You have got it spot on Ted. The "bad times" have some way to run yet - Thanks Labour.
- Dave Davies, Basingstoke, Hants
Something's badly out of kilter between share prices and our currency, but Black October still has nineteen days to run.
- Ted, London
