Why is'nt the pound getting stronger against the baht?

Day the dam burst: fears of election deadlock sink pound
Ian King, Gráinne Gilmore

The pound suffered its biggest one-day fall for more than a year yesterday amid the prospect of a hung Parliament and growing fears that this will prevent swift and decisive action being taken over Britain’s public finances.

Sterling crashed by more than four cents at one stage against the US dollar, dropping below $1.50 for the first time in ten months. It also fell to its lowest level against the euro for nearly two months.

At one stage, the pound — which had traded at $1.5247 on Friday evening — fell to $1.4784, before rallying. It was sterling’s worst day since February last year and analysts warned that it could weaken further in coming weeks, as political uncertainty continued — possibly sinking to $1.20 or less by the summer.

The decline came after a Sunday Times opinion poll suggested that Labour could remain the largest party in Parliament after the general election, but without an overall majority.

Nick Beecroft, senior FX consultant at Saxo Bank, said: “We are witnessing what can justifiably called the beginnings of sterling’s collapse. So long as the markets could harbour some hope that the next government would be a fiscally prudent, business-friendly Conservative one that would act swiftly to reduce the UK deficit and borrowing mountains, the pound was able to just about hold its own against the euro — which is, itself, entering a possibly fatally damaging period.

“But today the dam burst, and it could not even do that, let alone against the mighty dollar. This weekend’s election polls predicting a Labour Government, ruling over a hung Parliament, put paid to that dream. Expect a test of $1.40 within a month and, as the global landscape turns ever-more ugly on the back of deflation and sovereign debt concerns, a continuing flight to the dollar, taking sterling down below $1.20 by the summer.”

Mark Deans, dealing manager at the brokerage Moneycorp, agreed: “If the fears of a hung Parliament were to come true, sterling could fall even further, with a risk of us reaching parity against the euro.”

Analysts said sterling had also been hit by rumoured selling by Prudential advisers ahead of its planned $35.5 billion takeover of AIG’s Asian assets. They said that because the Pru is having to exchange sterling for dollars when it completes the deal but is not expected to have raised the funds until May, any falls in sterling would potentially make the deal more expensive — making it sensible for the insurance giant to “lock in” at present rates.

On bond markets, gilt prices also fell amid the political uncertainty, with the yield on ten-year gilts — which rises as the price falls — increasing from 4.03 per cent to 4.106 per cent at one stage. Sentiment was further undermined as the Bank of England published figures showing that foreign investors sold a net £1.49 billion of gilts in January — the highest figure for nine months.

Richard McGuire, a strategist at RBC Capital Markets, said: “Concerns over a hung Parliament and worries about whether we will have a political landscape conducive to bringing the deficit to heel have triggered a marked under-performance of gilts today.”

rick wrote:well, i would disagree with some of that. First, as we are not in the Euro, the greek issue does not affect us as much as the eurozone. Well shouldn't anyway in my view. Secondly, yes our borrowing has increased more than most european countries but we had one of the lowest government debts per capita in europe. Even at current borrowing rates, we only hit the european average in 3 years or so. Greek levels are highly unlikely for us. So i think the market is over nervous. ...

March 1 (Bloomberg) -- While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next...

rick wrote:Out of recession yes, but barely and expected to have been better. both FTSE and pound have fallen

Philip101 wrote:very true!!!!Sorry about my use of words there your right not EVERY ferang gets lulled some do have their head screwed on!!!

Philip101 wrote:Fallen locks,

The evidence thats were out of reccesion is that the british econnomy grew between 0.1 and 0.4% in the last financial quater, this TECHNICALLY means britain is out of recession, yes jobs are still being lost, but the job market is also growing, it just depnds what industry your in or want to be in.

Everybody just reports the negatives not the positives, plenty of retailers/small businesses even airlines are going from strengh to strengh...

Barclays has just made a ridiculous profit, so has RBS and HSBC

A reccesion is when the economy is shrinking one financial quater after another, this has stopper, the economy is growing, a INCREDIBLY small amount but its GROWING