Pound May Fall Below Parity with Euro, Economists Warn
TIMES ONLINE: Economists have warned that the pound is on the brink of sinking below parity with the euro due to the Government’s unconvincing plans to tackle Britain’s £178 billion budget deficit.

Douglas McWilliams, the chief executive of the Centre for Economics and Business Research (cebr), said that the British economy was walking “five yards away from the edge of the cliff” and could be toppled by an “unexpected gust”.

The pound is trading at 1.10 against the euro after hitting a low of 1.02 a year ago. However, currency markets are reflecting the expectation of a win for the Conservatives in next year’s election, raising hopes of tougher action to tackle the deficit. Any signs of Labour closing the gap ahead of the election would result in the pound plunging, according to the cebr.

“If I had to bet, I would bet on the side of parity being broken,” said Mr McWilliams, adding that there was significant downside risk for the euro as a result of the divergent economic performances of countries such as Germany and Greece. >>> Nic Fildes | Monday, December 28, 2009

Pound 'Will Fall to Parity with Euro'
THE TELEGRAPH: Sterling weakened yesterday to close at just over 90p to the euro for the first time in four months, amid renewed concern over the state of the British banking system.

The low came as currency experts predicted the pound would fall further and reach parity with the euro within the first three months of 2010. One euro was worth as much as 90.36p, the highest level close since May 11. A year ago a euro would only buy 79p.

Confidence about the UK currency was eroded when issues surrounding Lloyds Banking Group's participation in the asset protection scheme once again put the spotlight on Britain's financial system, highlighting the problems that remain.

The pound was also significantly weaker against the dollar, closing down almost two and a half cents at $1.6291.

Currency strategists at BNP Paribas suggested sterling's weakness was not just a short-term blip because sterling would be dragged down by ongoing loose monetary conditions in the UK, relative to the eurozone.

"Sterling is likely be the underperformer among the majors, despite a favourable global financial market environment, as the UK domestic picture is set to deteriorate, with the fiscal/monetary policy mix in particular working against sterling," they said in a note. >>> Angela Monaghan | Friday, September 18, 2009

THE TELEGRAPH:
With pound heading for euro parity, Brown's legacy will become clear >>> Damian Reece | Friday, September 18, 2009