The pound ended its seven-day slump against the euro today and rose against the dollar, to above $1.40, despite horrific news from the High Street.Sterling was up 1.03 cents against the European single currency, to €1.0752, making one euro worth 93.0p. It was also up 1.4 cents to $1.414 against the greenback, having fallen to $1.35 on Friday - its weakest since September 1985.
The rally came despite the bleakest forecast from the High Street in 25 years after nearly two-thirds of retailers saw business decline on a year ago in the New Year sales.It raised fears the recession could be deeper and longer than expected. Howard Archer of Global Insight said he now expected to UK economy to contract by 3.1% in 2009, the steepest decline since the aftermath of the Second World War, compared with his earlier forecast of 2.9%.
But currency traders were betting the pound has been oversold in recent weeks and analysts at BNP Paribas argued that sterling's next stop could be $1.46. This followed assurances yesterday from Barclays that it did not need a Government bailout, which would have put the UK's fragile finances under even greater strain. Barclays shares jumped 73% yesterday and were up another 5%, or 4.3p, to 93p today.
'The fact that sterling is benefiting from the banking news suggests it may not be the lost cause many seem to assume it is right now,' said Steve Barrow, head of G10 currency research at Standard Bank. BNP analysts added that the downturn in the UK is unlikely to be as bad as that in the eurozone.
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