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UK pound falls to 28 year low

The UK pound has today fallen to a 28 year low against a basket of leading currencies including the dollar and the euro. As further concerns are expressed towards the health of the UK economy and the ever-increasing national debt, which now stands at approaching £1 trillion, there appears little reason for traders to switch into sterling at this moment in time. The fact that interest rates are set to fall in the short term is also another factor which is weighing down on the exchange rate and causing serious pressure.

While a weaker pound will assist those exporting to overseas markets, there will be an increase in the cost of living across the UK as imports will be more expensive to the tune of around 30% with American imports. This could have a serious impact on inflation in the next two years unless the currency is able to facilitate a substantial recovery in the short to medium term. Quite why the value of sterling has fallen so sharply so quickly is a mystery but the move has continued even though the UK government has expressed the view that the recession will be fairly short lived.

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