brit- Sterling weakens against Euro
- From: Jerry@xxxxxxxxx (Jerry)
- Date: Sun, 13 Apr 2008 16:40:02 GMT
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/04/11/bcnpound111.xml
Sterling weakens further creating both winners and losers in UK
By Angela Monaghan
Last Updated: 1:15am BST 13/04/2008
Sterling's weakness against the euro is likely to accelerate over the
next few months, currency experts have warned, creating both winners
and losers across the British economy.
With the pound tumbling to a new record low against the euro as it
heads closer to 81p today, Sir Ken Morrison, the recently retired
founder of the supermarket chain bearing his name, said that the
weakness will push prices up on British supermarket shelves.
Sir Ken said today that the price of meat will rise as European
supermarket chains take advantage of their increased buying power.
"The problem at the moment is that we've got the diminishing value of
the pound in Europe," said Sir Ken. "Fortunately we're not too bad
with the dollar, but food prices are certainly going to increase. "
Sterling has been dumped on trading floors in London, New York and
Tokyo as traders anticipate a series of interest rate cuts by the Bank
of England on top of its quarter point cut to 5pc yesterday. At the
same time, say analysts, the euro will remain buoyed by the European
Central Bank's reluctance to trim rates in Europe from their current
level of 4pc.
Paul Robson, a currency strategist at Royal Bank of Scotland, said:
"The pound continues to weaken and there will be more pressure on the
Bank of England to cut further. It will be a theme over the coming
months, and therefore the pound will continue to suffer.
"The ECB will cut rates but not until after the summer, pushing the
sterling euro rate lower."
British manufacturers and exporters will be among the limited winners,
as European buyers can get more British produce for their pound. The
Office for National Statistics said this week manufacturing output
exceeded forecasts, rising by 0.4pc in February compared to January.
On the year, factory output rose 1.9pc - the strongest annual rate
since December 2006.
The increased demand for British goods is already pushing prices up in
the UK and could lead to shortages and higher prices for the British
consumer. The price of a British lamb, for example, has more than
doubled since Christmas from about £30 to £70, and farmers say that
this is party due to the exchange rate.
However, it is unlikely that retailers, currently battling out for
customers in a difficult trading environment hit by weak consumer
sentiment, will pass on the full price increases because they do not
want to put customers off.
Sir Ken added: "There's plenty of competition out there on the high
street, I can tell you. And there will be nobody putting prices up
that they don't have to put up. Bread is £1 a loaf now and things like
this and I think we've got to get used to it. I do think the retailers
will absorb a certain amount of it, but they can't absorb it all.
There will be marginal increases, without doubt."
As well as British farmers and manufactures, the domestic tourist
industry could be boosted as Europeans head to the UK for holidays
because they can get more for their money.
On the other hand Brits heading to Europe for a holiday will find it a
lot more expensive than a year ago. Florida - which a year ago ranked
as one of the most expensive holiday destinations in the world - is
now £532 cheaper than a similar holiday in Provence, South of France,
according to figures compiled by TravelSupermarket.com and the Post
Office.
But while sterling is expected to fare better against the dollar in
the short-term, 2009 could be a different story according to Mr Robson
as the impact of the Federal Reserve's aggressive rate cutting starts
feeding through to the broader economy.
David Bloom, currency strategist at HSBC, said that the depreciation
of the pound was a bigger problem than so far acknowledged because it
had been drowned out by the broader global outlook and credit crunch.
"If this was going on at another time it would be a real crisis area,
but because of what's going on, it is a little bit hidden. Even though
you cannot tell which currencies are going down, sell the pound
against everything. Three against four times it will work because it
is falling against everything," he said.
"There was blood all over the place. Someone had already phoned the
emergency services and they were on their way. The air ambulance had
to then land in the garden across the road and the pilot was taken to
hospital."
Firefighters, paramedics and police found the pilot shaken and dazed.
He was airlifted to hospital, where his injuries were determined not
to be life-threatening. The man, who has not been named, was in a
"stable" condition yesterday, despite a deep head wound. He had taken
off from Popham airfield in Hampshire and was due to land in a field
near Highclere.
The four-bedroom detached home where Mr Seymour lives with his wife,
Jacki, was sealed off as an air accident investigation began into the
cause of the crash, which took place at around 4.30pm on Friday.
The white microlight aircraft came to rest upside down, touching the
rear outside wall of the Seymours' home and just feet from their glass
conservatory.
Mr Seymour called in his insurers and a structural engineer to examine
his home yesterday. "The conservatory was damaged slightly but the
house does not appear to be damaged, thankfully," he said.
The Seymours had to stay elsewhere on Friday night, but yesterday the
wreckage was lifted out of their garden by a crane.
The crash happened less than a fortnight after five people - two
pilots and three passengers - died when a private jet crashed into a
housing estate and burst into flames.
Witnesses told how the pilots had appeared to struggle to avoid homes
on a residential estate, but landed on a house in Farnborough, Kent.
There were no injuries on the ground, and the couple living in the
detached, £700,000 property - which was destroyed - were on holiday.
.
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