Time to pack your bags, Americans, and head off to England for that trip you’ve put off for, say, six to eight years now. The U.S. Dollar-British Sterling exchange rate is heavily favouring the greenback, with rates as low as $1.49 to £1. Most commodities are up to 25% lower, which obviously translates to more affordable ale at the hotel pub. But maybe you should book that British Airways flight now…
Market Watch: But such discounts may not last. Some foreign-currency strategists are now predicting sterling could rebound after its 27% drop against the dollar last year — its steepest fall in at least 50 years.
That’s because some forecasters see more rough times ahead for the dollar, which climbed out of its doldrums in early 2008 to post a nearly 6% annual gain against its major trading partners.
“The dollar isn’t really lining itself up for a good year in 2009,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange Ltd. in London.
Worries about the yawning U.S. fiscal and current account deficits, as well as the Federal Reserve’s near-zero interest rates could trip up the greenback’s recent rally, he added.
“These levels look to be pretty good for tourists who want to sell dollars and buy pounds, and I wouldn’t expect them to stick around for that long,” Gallo commented.
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