The Great Debate UK

Cable: parity is still a long way off but $1.40 beckons

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Jane FoleySince 1982, cable has been contained by the 1985 low of GBP/USD1.0790 and the 2007 high of USD2.0798.  The bulk of this time cable has remained within a narrower 1.40 to 1.80 trading range.

These statistics illustrate how significant it would be if the pound were to slip to parity with the dollar this year.  They have not, however, stopped some commentators speculating about such an event.

The problems affecting the pound are well documented.  The appalling truth is that a combination of low growth expectations for the UK economy and a crippling budget deficit have opened the risks of a funding crisis (if the government does not get the budget in order) or a double dip recession (if too much austerity is introduced too soon).

There may exist a narrow policy path the government could steer that would allow for improved fiscal management and moderate growth but, since the chances of a hung parliament are failing to disperse with just 2 months to go before the favoured election date, it appears likely the new government will lack the backing to take difficult decisions.

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