This week has been no different. When it was revealed that Britain's trade deficit (difference between what Britain imports and exports) with the rest of the world had widened from £7 billion in December last year to £8 billion in January this year, traders reacted in horror and the already pathetically weak POUND weakened even further against the US dollar, EURO and a bucket full of other currencies around the world. It was hoped that the weakening POUND would have increased Britain's competitiveness and improved exports but exports actually fell by £1.4 billion to £19.5 billion in January. DOH!!!
The POUND cannot rise
Now here is the problem: The POUND cannot rise. In fact, it would be better if it goes on par with the US dollar. At least this is the concensus of analysts and even Bank of England Governor Mervyn King. It is expected that allowing the POUND to fall to $1 against the US dollar will boost manufacturing exports and rebalance the economy, pulling it out of the recession (yeah, contrary to popular belief, Britain is still in recession).
Lets hope the predictions come true because confidence in the UK economy is eroding fast as the weakening POUND shows evidence of an economy in tatters.
