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Gordon Brown rules out support for the UK currency

In a startling U-turn the UK government has ruled out sustained support for sterling which appears set to move to parity against the euro. The currency has been in freefall for some time and there were hopes that the UK government would make positive noises to try and alleviate the pressure on the pound. However, Gordon Brown has suggested that the exchange rate is a matter for the "markets" and the government will not be intervening in any supporting role.

This latest move is sure to see sterling come under renewed pressure with speculators now certain that the UK government will not step in with physical cash to support the currency nor introduce specific strategies to assist sterling. When the main markets open on Monday many analysts are expecting a "free for all" on the pound which could have serious implications for the long-term future of the UK economy. A falling currency has benefits for those exporting to overseas markets but is likely to fuel inflation as the cost of importing goods not available in the UK continues to rise.

The current level of the pound against such currencies as the euro and the dollar is causing severe concern in investment markets.

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