The pound posted the fourth day of losses in a row against the U.S. dollar as a serious political crisis deepens in Great Britain, where Prime Minister Gordon Brown’s Labour party is losing influence significantly.
Negative factors weighing on the pound are coming from virtually everywhere on the political sphere in the United Kingdom and the European Union, making the pound to reverse an uptrend started by signs of economic recovery. Prime Minister Gordon Brown is suffering sequential calls to resign, as his party had the weakest results in the European Parliament elections, reaching just 15.3 percent of voters, a drop of 7 percent from 2004. David Blanchflower, former Bank of England policy maker, affirmed that the central bank may continue its intentions of buying assets with newly created money, in order to rescue the shrinking British economy, adding pessimism to the pound outlook.
As long as Gordon Brown resists to resign, the pound will continue its bearish trend, according to currency strategists. The United Kingdom is in its worst economic moment since the end of the Second World War, and Gordon Brown is considered unable to rescue Great Britain from the current negative scenario. The pound is likely to continue weak, and as long as Brown remains in power, it’s rather improbable that the pound will recover versus the main currencies.
EUR/GBP rose slightly to 0.8738 from a previous price of 0.8743. GBP/USD traded at 1.5868 from 1.5972
The dollar gained versus the main currencies as speculations that the U. S. Government will raise its interest rates by the end of the year, consequently causing a bearish day in equities markets around the world.
The Brazilian currency continued its rally against the dollar, euro, as the demand for commodities continues to rise on improved economic conditions mainly in Asia, spurring demand for assets in emergent markets.
The Swedish currency hit a six-week low level after speculations rose that Latvia will devalue its currency, as an attempt to save the country from a deep recession, consequently affecting negatively loans held by Swedish banks in the Baltic Nation.