Taking a pounding

Forex traders must have been wondering whether the pound was ever going to stop falling as it plummeted towards record lows recently. Not for twenty three years have we seen the pound at such a weak point in relation to other currencies.

The banking sector crisis and the poor UK economy have driven the pound downwards. The pound at one point stood at less than $1 dollar 40 cents - a price not heard of since the mid 1980s.

Only last summer the pound was trading at $2. How many forex traders would have predicted a fall of 60 cents? This is the nature of the trading business however. It is a fairground ride of highs and lows. This is why we find the activity so addictive and fascinating to participate in - it’s the sheer thrill of not knowing.

The pound’s slide can be explained by a myriad of different causes but perhaps one of the biggest was RBS’ signalling of a massive loss and the government’s desire to encourage lending.

This situation was exacerbated by the announcement of a 30% fall in lending, the lowest figure for seven years. Add to this the spectre of unemployment queues and investors will be looking to whether the pound even exists in a few years never mind what you get to the dollar