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Sterling under pressure against Euro

Despite the fact that yesterday we saw the Irish credit rating downgraded and announcement of significant financial challenges for the Hungarian authorities, the UK currency fell to a new recent low against the euro. Despite the fact that one member in particular of the MPC continues to call for an increase in UK base rates, this gave little support to the currency with negative comments regarding the property sector weighing down heavily upon sentiment.

While there is no doubt that the UK property sector is under pressure, with signs that selling prices are softening, it is concerning to see the UK currency falling against the euro especially when you consider the problems within the Eurozone. If the currency is falling against this difficult economic backdrop what can we expect if the Eurozone recovers or the situation in the UK worsens?

While the austerity measures introduced by David Cameron and his coalition government have been well received on the whole, there is no doubt that the UK economy will be impacted in the short to medium term. Whether or not the Bank of England can offer short-term support to the currency remains to be seen but investors need to find inspiration from somewhere to increase the attractions of sterling.

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