U.S. Dollar and British Pound Weakening Currencies
Jack Crooks takes a closer look at the poor U.S. economy and dollar and comparatively considers the possibility of the British pound following in the dollar's footsteps for 2008. In this issue of Money and Markets, Mr. Crooks examines the similarities between the dollar and the pound.
Jupiter, Fla. (PRWEB) January 13, 2008 -- Jack Crooks takes a closer look at the poor U.S. economy and dollar and comparatively considers the possibility of the British pound following in the dollar's footsteps for 2008. Mr. Crooks examines the similarities between the dollar and the pound.
The housing market in the United States is collapsing. The evidence of an economic slowdown is already piled high, and the jobs report on January 11 was the final straw. Before that, analysts had been reluctant to forecast a full-blown recession because U.S. employment remained solid. But a dismal pace of new payrolls and a heated uptick in unemployment has made it clear just how bad things have gotten in the labor market.
So, is a U.S. recession largely factored into the currency markets? After all, investors were betting heavily against the dollar in 2007. The question is not if, but rather how much the next interest rate cut will be. And aggressive action from the Fed could drive the dollar to new lows.
Ben Bernanke, in his prepared speech on January 10, signaled that the Federal Reserve will cut interest rates further to aid ongoing economic weak spots. Currencies responded in the way expected; they rallied sharply against the U.S. dollar. But there was one notable exception: the British pound barely budged.
Will currency investors batter the pound as much as they killed the dollar last year? At first, that sounds absurd. That's because we've become used to watching the two currencies trade against each other rather than in tandem.
But when taking a closer look at what's happening in the U.K., the idea of a falling dollar and a falling pound makes more sense. At a time when the dollar story is getting stale, it's easy for analysts and investors to simply transpose much of the negative U.S. dollar story right onto the British pound.
Look at the fundamentals:
- U.K. house prices fell 0.8% in the fourth quarter.
- Retail sales rose only 0.3% in December.
- Core prices in the U.K. are at the lowest level in 13 months.
- The savings ratio among Britons has dropped below zero for the first time since the late 1980s.
- And household debt service makes up a whopping 14% of incomes.
Those point to downside ahead, for both the U.K. economy and the pound. The British pound fell to an all-time low against the euro and more than a ten-month low versus the U.S. dollar this week.
"It's obvious the U.K.'s central bank is starting to face the same demands that pushed the Federal Reserve to begin its series of interest rate cuts. What matters now is how soon the Bank of England succumbs to evidence of a weakening U.K. economy," Mr. Crooks states.
To read this issue online, please visit:
http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1356
About JACK CROOKS & MONEY AND MARKETS
John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research's latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.
Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.
Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron's, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.
Mr. Crooks holds a bachelor's degree in finance from Florida State University and a master's in business administration from the University of North Texas.
Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.
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