Sterling losses continue as forecasts for double-dip resurface

The pound has made losses of almost 4 cents against the Euro, 9 cents against the  AUD and 5 cents against the Canadian Dollar in the last week.  The pound had spiked following the UK budget  on the 22nd June but was helped last week by news that MPC member Andrew Sentance had voted for an increase in UK interest rates.  This helped the pound as investors would receive a better return on funds if rates were hiked.

Unfortunately for anyone holding sterling it looks highly unlikely that this will happen during 2010.  With government spending cuts comingin to effect later in the year, it looks likely that inflation will fall (the main reason behind the potential for an interest rate hike).  Therefore it is unlike that we will see better sterling exchange rate due to GBP strength.

The only real hope for anyone buying the Euro is that the banking fears in Europe and Soverign debt issues come back into focus.  For anyone looking to purchase other currencies there is little to suggest the pound will increase in value from current levels.

The only silver lining is for GBPUSD, which has made gains of around 5%  in the last 6 weeks.  This appears to be due to USD weakness, as investors are currently favouring the Swiss Franc over the USD as a safe haven currency.