By TraderVox.com
Trdervox.com (Dublin
) – The Europe debt crisis and the declining global economic are some of the reasons casting doubt to the ability of the Bank of Japan and the UK government to pull the country out of recession. Investors are concerned about the country’s ability which has forced the sterling pound to decline to five-week low against the US dollar. These concerns we raised by the PricewaterhouseCoopers LLP after it warned UK businesses to prepare for the possibility of a prolonged recession citing the deepening Europe debt crisis. The sterling pound also fell for the third day against the dollar as ten-year yields were sold at a record low.
According to Lee Hardman, who is a Foreign Exchange Strategist in London at Bank of Tokyo Mitsubishi UFJ Ltd, the optimistic scenario is that the IK recession will not end until next year given the situation in Europe. He predicted that the pound and the euro will weaken as the dollar continues to enjoy safe haven demand as risk aversion creeps back into the market. Some economists have cited Fibonacci analysis, saying that the pound might find support at 61.8 percent Fibonacci retracement of the rally in May 2010 and April 2011 of $1.5192, where it might touch the low of $1.5269 and later $1.5235 which are last month’s low and this year’s low respectively before that.
According to a report by the PWC, the UK economy will probably register zero growth this year as downward pressure increases on the economy. Another report by the Britain’s fiscal watchdog indicated that the country’s public finances cannot be maintained increasing speculation of prolonged recession in the Kingdom. These data has led the sterling pound to drop by 0.5 percent against the dollar to trade at $1.5417 at the close of trading in London yesterday after it had weakened to $1.5394 which is the weakest level it has been since June 6. The Great Britain Pound also fell by 0.2 percent against the euro to trade at 79.06 pence per euro.
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