Pound falls below $1.49
Today, just before midday Pound Sterling fell sharply from the valuation over $1.51 to less than $1.49. It fell against the other major currencies by a similar proportion. It reached its lowest point against USD since last May after continuous decline since mid-November 2009.
It was feared it may be a double-dip recession, however it seems unlikely, at least at the global level. However, it may just well be the case for Pound Sterling as it dives under $1.5. Since the end of 2003, Pound has been overvalued by a significant amount, reaching ridiculously high valuation at more than $2.1 in November 2007, then it became severely undervalued from end of January 2009 till April 2009. It has reached its relatively stable (and reasonable level in my opinion) of $1.6-$1.7 from June 2009. But from end of January this year, it has gone below $1.6 with the rest of the financial markets due to previously unseen problems starting with Greece's sovereign debt, weak economic results and still increasing unemployment in many industrialised nations. Markets started recovering from mid-February, yet Pound remains falling.
Some given explanations are UK's public debt, which has been ballooned in the last 18 months and set to increase further for next few years, and today's spectacular fall was attributed to the approaching general election, as hung-parliament is becoming more of a possibility in the UK, as Tory leader David Cameron's popularity with its party has fallen and the its lead over Labour is diminishing.
I don't think public debt problem can explain the whole story, as the problem is not confined to the UK. However today's fall maybe explained in terms of the upcoming general election, although it's questionable if it can explain the continuous fall.
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