It’s lost the psychologically important $1.50 level (irony intended, readers).
Reasons?
The UK trade gap widened in January to a 17-month high, according to figures released by the Office for National Statistics on Tuesday morning. Exports fell sharply, while imports declined only modestly. So much for the rebalancing of the UK economy.
Here’s Howard Archer of IHS Global Insight on the data.
There is no getting away from the fact that the January trade data are disappointing and also worrying for hopes that the economy can rebalance over the coming months. The total trade deficit widened to a 17-month high in January as exports worryingly fell appreciably and imports declined modestly. This suggests that net trade is set to be a drag on the economy in the first quarter of 2010 as it was in both the fourth and third quarters of 2009. Specifically, net trade lopped 0.2 percentage point off GDP growth of 0.3% quarter-on-quarter in the fourth quarter of 2009 and contributed 0.3 percentage point to the third quarter contraction of 0.3% quarter-on-quarter.
We are still hopeful that net trade will make a positive contribution to UK growth in 2010 as car imports wind down as the car scrappage scheme comes to an end and overall imports are limited by likely gradually improving domestic demand. Meanwhile, exports will hopefully be lifted by a competitive pound and improved global growth and trade. Unfortunately though, this is very far from guaranteed, and current signs that Eurozone growth is struggling for momentum is a serious worry for UK exporters.
Fitch has also just said the UK’s sovereign credit profile has deteriorated, though making no move yet on its AAA rating.
Via Reuters:
FITCH SAYS UK SOVEREIGN CREDIT PROFILE HAS DETERIORATED
FITCH SAYS UK AND GLOBAL ECONOMIC OUTLOOK UNCERTAIN
FITCH SAYS UK NEEDS STRONGER FISCAL ADJUSTMENT FITCH SAYS AMONG LARGER AAA SOVEREIGNS, URGENCY GREATEST FOR UK, SPAIN AND FRANCE
FITCH SAYS UK STILL WITHIN TOLERANCE OF TRIPLE-A RATING
FITCH SAYS UNCOMFORTABLE WITH FISCAL ADJUSTMENT PATH SET OUT BY UK AUTHORITIES.
And on top of that, Moody’s is making some worrying noises about the UK banks.
Related links:
Goldman’s sterling-slump strategy – FT Alphaville
The Great British Peso – FT Alphaville
Scylla and Charybdis, sterling edition – FT Alphaville
‘Talk of a GBP crisis sounds like hysterical claptrap’ - FT Alphaville