Analysts say that wider concerns of an economic slowdown in the US and the prospect of possible interest rate cuts are behind its current weakness. It’s also run into a strengthened Pound and a healthy Euro. The Euro, at a dollar and 36 cents, is at a two-year high.
Meanwhile, at a peak of two dollars and a cent, Sterling is at its highest rate against the Dollar since 1981. Henk Potts of Barclays explains what this means for British companies: “Obviously that has implications for companies that are looking to export goods, particularly to the US, now find they’re very much less competitive than they were only a few months ago. And of course companies that have got significant operations in the US, who make their money in dollars, when they’re translated back into Sterling suddenly it doesn’t look so impressive.”
Faced with high domestic inflation, it’s good news for Britons who want to go shopping in New York. But it means Americans are putting less money into British pockets. “When we came here we knew it was going to be expensive for us anyway. We’re only here for a week and we’ve never been here before so we definitely want to try and have a good time, but I think we’re going to be buying more groceries and cooking in my daughter’s apartment instead of eating out.”
The Euro, driven by a resurgent German economy, continues to grow despite higher export prices. It may not yet rival the Dollar as an international currency, but rising investor demand for it is a welcome present in the EU’s golden jubilee year.