HiFX predicts rate cut could cause pound to fall further

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HiFX predicts rate cut could cause pound to fall further

Wed 7th Jan 2009

HiFX, a foreign exchange services provider, has predicted that a dramatic cut in the base rate of interest may cause the value of the pound to fall further as worried currency speculators sell it off.

The Bank of England is expected to announce a further cut in the base rate of interest later this week which, if it is a large reduction, could cause investors to take fright about the state of the UK economy and sell Sterling.

Chris Towner, Senior currency strategist at HiFX, claims that any loss in value may prove a bonus to UK manufacturers, but if rates stay stable at their current two per cent, the pound may recover some of its lost value.

However he added that this is unlikely.

Mr Towner said: "The most likely scenario is that tomorrow we will see a compromise of between 0.5-one per cent worth of cuts, but the market certainly this time around will be braced for all eventualities."

In recent months the Bank of England has cut the base rate by 2.5 per cent in total.

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