Pound heading for new troubles

 

A FRESH bout of turbulence in the currency markets towards the end of this year could send the pound as high as 108p against sterling, a senior European economist has forecast.

Speaking in Dublin yesterday, Bank of America's chief European economist, Mr Jeremy Hawkins, warned of further problems for exporters.

The pound, which is currently trading at around 103p sterling, could rise as high as 108p against the sliding British currency, before settling at levels of around 106p by the end of the year, he says.

But interest rates will remain low, according to Mr Hawkins, with mortgage and other retail lending rates expected to stay at current low levels.

Money market or wholesale interest rates, on which retail rates are based, are likely to rise by as much as a 0.5 per cent, he added.

Sterling's slide will also cause problems for the Irish authorities. he believes, raising a dilemma in terms of its exchange rate policy. "The choice is either to maintain competition against Britain by allowing the pound to fall against the deutschmark, or raise interest rates to protect it from following a weaker sterling," he says.