The U.S. Dollar is soaring higher on a daily basis as markets fall apart all around the world. The U.S. Dollar Price Outlook (PPO) in today’s market has the U.S. Dollar at an all time high while global markets continue to tumble.
The pound sterling has fallen against many other currencies as Britain faces its biggest ever General Election and the British economy takes another significant hit. The British economy has been hit hard by a major hit to its banking industry as thousands of employees lost their jobs in the collapse of the Northern Rock and RBS banking institutions. The global meltdown has left the British economy in recession and unemployment numbers continue to rise.
With this in mind it should come as no surprise that the British Pound continues to fall against the U.S. Dollar. Even before the U.K election results were announced last week, it was expected that the pound would depreciate against the Dollar. When the news broke the Pound went into freefall but has since regained some strength against the Dollar.
The Pound continues to depreciate against the US Dollar as the U.K. election results are announced and the British media speculates over the future of the Conservative government. The result of the U.K election is very unlikely to lead to a victory for the coalition parties in Parliament but with the current economic climate in Europe it is likely that there will be more European elections next year than previously expected.
The current situation in the United Kingdom and in the rest of Europe is a major concern for all investors as a number of countries are facing difficulties. Italy, Greece, Portugal, Spain, Romania, Hungary and Poland are all in the grip of deep recessions and many of them may be forced to request financial assistance from the European Union or the International Monetary Fund (IMF). If these governments are successful in securing financial assistance it could lead to the need for a major bailout by the EU.
The Eurozone and the European Union are struggling to contain the financial crisis while the United States is facing its own issues with the housing market crash. The Eurozone is trying to support their own economies by allowing the Euro to fall against the U.S. Dollar so that there is less pressure on the American dollar and thus a lower value of the Euro will reduce the pressure on the U.S. Dollar which will have an adverse effect on the US Dollar.
The European government has encouraged its citizens to save money as it is concerned that the United States may have trouble meeting its deficit commitments in the future. The euro crisis is also pushing up the costs of imported goods and therefore hurting the U.S. consumer. Dollar.
While the Eurozone and the European Union will attempt to bail out banks in order to prevent the problems from getting worse, the U.S. government will try and prop up the market by making it more difficult for U.S. citizens to borrow in the U.K. The British government’s deficit outlook is not a good one and it will mean higher interest rates for both borrowing and higher prices in the U.K.
If the U.K. economy continues to falter then it will force the United States to take an even bigger bailout of its own which will lead to higher inflation for both the United States and the United Kingdom. This may lead to a situation where the U.S. Dollar becomes overvalued, meaning that the United States dollar price outlook for goods and services becomes distorted and so do the price of goods and services for U.S. consumers in the United Kingdom.
In terms of the Eurozone, it is very difficult to see how they will be able to get rid of the problem and it is going to cost the Europeans in the long run. There is no reason why the Eurozone cannot continue to support the European economy but this will be a major setback for the United States. States who will have to suffer at the hands of a weak Eurozone and a stronger European economy which are much stronger than the United States.
A weak Eurozone may even cause an economic recession in the U.K. but that is a price that the United States is preparing to pay for the U.K. if the U.S. Dollar price outlook for goods and services improves as it can benefit greatly by investing in the weaker European economy.