London 19/12/08-The UK pound is almost at parity with the Euro, a startling slide for the currency. The new lows for the pound came after the British government released official figures showing the budget deficit hit a record high in November.
These figures show that the government will have to go further into debt as announced tax cuts will cut into revenue figures even more. The pound fell at the end of the third week in December to just above 95p to the euro, or about €1.05 for one pound. Additionally, the currency has tumbled on comments from Bank of England deputy governor Charles Bean, who has said that interest rates could fall to zero. They are now at 2% following recent deep cuts.
The financial sector of the UK is taking a large hit in the current economy and is one main reason for the fall of the pound. The crisis in that sector, which is extremely important to the country, has helped to usher the drop in the value of the currency.
“Parity with the euro is within reach. There may be some psychological or options barriers at that level, but there is no reason why we shouldn’t get there,” Citigroup currency strategist Michael Hart said.
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