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Concerns about double dip recession impact upon sterling

Concerns that the UK economy is on the verge of a double dip recession have had an impact upon the exchange rate today with sterling falling to a one-month low against the dollar. While this may not seem overly concerning on the face of it, when you consider that the dollar is at a 15 year low against the yen it does reflect the ongoing weakness in sterling.

Much of the downward movement in the exchange rate today was brought on by briefings by members of the MPC who are concerned about the potential for a double dip recession. Even though nobody will put their head on the block and confirm that a double dip recession is inevitable, the very fact that it is being mentioned is starting to concern investors. Ironically, a reduction in the UK exchange rate will assist exporters in the country and could help to support the UK economy in the short to medium term.

This ongoing difficulty with the UK economy is very complicated and will take some time to unwind and unravel. We are in a situation the likes of which we have never seen before and even similar economic climates seen back in the 1930s and earlier do not compare directly to the current situation.

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