The sterling has been generally regarded as one of the high value based currency reserves of the world. Its value, in respect to the other currencies, has been on the higher side. This has been because of various reasons, one of the main being the good and reliable financial markets that the United Kingdom is able to offer to investors worldwide. Due to the stability within the UK, and the ensuing level of trust, it has been able to attract massive inflows because of the bourses and financial markets, particularly in London, providing burgeoning returns. The high value further, allowed greater consumption by the people of the United Kingdom, allowing greater imports and out of country vacations. The current financial crisis however sees the Pound Sterling being drastically devalued.
In recent months, the Sterling's decline in value in relation to the euro is interpreted by economists and some political elements within the United Kingdom as evidence of diminishing faith in the British economy on worldwide currency markets. Political elements, especially those belonging to the liberal side have rushed to blame the policies of the Prime Minister Gordon Brown for the collapse in the Sterling's value (Heffer). Sources close to the treasury hinted that the decision in the pre-Budget report to increase borrowing to fund reduction in taxes had led to a downturn in economic confidence and thus had affected willingness of people to spend, ultimately leading to the drop in the Pound. A Liberal Democrat Treasury spokesman observed that while the decrease in interest rates had been the main reason behind the fall in the sterling's value, it was supplemented by the expectation that the rates would decline even further (Heffer).
The sterling fell almost 17 per cent compared with the euro in 2008 as the Bank of England decided to cut rates from a peak of 5.75 per cent to a more-than-50-year low of 2 per cent. Political opposition points squarely towards the failure of the Government as the reason the interest rate cut had been necessitated in the first place (Mnyanda and Finch ). A general level of feeling can be said to be observed pointing towards the United Kingdom's economy being weaker than it seems and the housing bubble that plagued most of the western world being actually bigger in the country. Some amount of blame can be laid on Downing Street for not being able to do much to address it.
Taken from www.thisismoney.co.uk
This rapid fall in the fall in the Pound's value is beginning to have far reaching effects on the country's economy. The United Kingdom's consumer inflation level went up to around 3.8 percent, which slammed the expectation of quickly accompanying cuts in rates. The Office for National Statistics pointed out that Consumer Prices Index, the indicator of the inflation level, went from 3.3 percent in May 2008 to the drastic level reported above in June (Mnyanda and Finch ). It was the highest level of inflation since 1992 and made the Government's planned target of 2 percent appear silly. With the British currency trading at a value less than the euro, it can be said to have crossed a certain psychological barrier. In one way, the vulnerability in the sterling's value made a strong argument for the United Kingdom to become attached within