Could Sterling Fall To $1.55 Against The Dollar?
A well known economist in the City has caught the eye today with his comments regarding the possibility of sterling falling to $1.55 against the dollar over the next 12 to 18 months. Michael Saunders, who is head of European economics at Citigroup, said that he would not be surprised to see sterling fall to a level which has not been seen since 2002.
When you consider that sterling (currently trading at $1.8572 to the dollar) was trading at $2 just over a month ago, a fall to $1.55 would be a serious move by anyone's standards. The dollar has strengthened of late after a difficult period with investors around the world coming around to the fact that it is not only the US which is suffering. Some economists had suggested that the major worldwide economies were decoupling, leaving the US to take the brunt of the slowdown - unfortunately for the likes of the UK this is certainly not the case!
While the fall in the exchange rate between sterling and the dollar would assist with those looking to export from the UK to the US, it would make imports more expensive thus pushing up the rate of inflation - something which nobody would like to see!
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