In Russia, considered to be the beginning of the crisis in September last year. But in fact the developed world crisis began one year earlier. In September 2007, in the UK because of losses on U.S. sub-prime mortgage securities, was taken to balance the state a major bank Northern Rock. Since it became abundantly clear that the credit crisis in the U.S., will lead to worse consequences in the UK. As a result – the tightening of credit in the country, and the collapse of property prices, which partly helped to mitigate the monetary policy.
The year before the bankruptcy of U.S. giant Lehman pound has lost 15% against the euro (EUR / GBP rose from 0.6730 to 0.7750). After loud bankruptcy and rapid deterioration in the economy pound has fallen in price to a single currency by 26% (to 0.98) to the beginning of the year. As repeatedly noted by the representatives of the Bank of England, is weakening played a positive role in the economy, supporting industry and services, and leaving a positive inflation in the country. After Armageddon in the minds of market players is over, sterling has been gradually restoring its position. He became a kind of mirror for the financial sector. Pound bought on positive news from the banks and sold on the negative.
At the moment if we compare the euro area (not scratchy EU) and Britain, the latter certainly looks worse. GDP fell in the UK for the year to 5,5% for the second quarter and 4,5% in the euro zone. In the third quarter of Britain’s economy is once again demonstrating the decline in the euro area reasonably expect positive growth rates.
Such a sad situation for Albion reinforced expectations of quantitative easing monetary policy already at a future meeting of the Bank of England (5 November). Perhaps such assumptions and BNP Paribas was forced to revise the forecast for the pound to parity this year, but not in the first quarter of next.
Nevertheless, the weakening of the pound is very effective method of recovery. Bank of England has “published” a huge amount of 175 billion pounds. While the financial system remains “frostbitten”, and injections are not fully reflected in the dynamics of the market, but in the next few quarters it will definitely happen. As a result, the pound, we will probably see the same picture as the U.S. dollar: for a healthy economy and to reduce the debt burden will be useful to drop the course, and it is unlikely that officials will be hindered.