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Speculations on a Long-term Crisis

The British currency has declined further through speculations that a new long-term crisis is likely to occur in the United Kingdom due to concerns over the budget deficit; that it will seriously disrupt the economic recovery, as a result of which the Pound has descended about the 'safe' currencies.

Budget Deficits

After budget deficits in the eurozone, the rate of the Euro had a negative influence in December; the United Kingdom seems to be the next victim of a financial crisis, which will probably lead to the Pound having the lowest rates in years.

The Pound has reached the lowest rate in more than two decades against the Australian Dollar, falling rapidly against the U.S. dollar, currencies of emerging markets, and the safest currency in forex markets, the Japanese Yen.

Analysts have suggested that with the rising budget deficit, the Bank of England will force the program to purchase illiquid bank assets to continue, which means Pound priced assets will become less attractive.


It is a fact that the Pound is likely to face the same problems as the Euro because neither the ECB nor the BoE has a viable plan to eliminate the budget deficits. It will not be surprising if the Pound reaches the lowest rates in years against the major competitors.

Canadian Dollar

The Canadian Dollar has reached the lowest rate in two weeks against the American Dollar; this pessimism has a negative impact on the prospects of currency associated with growth.

An excellent example is the Loonie, given that Canada is one of the world's leading suppliers of raw materials and bulk products.

Risk aversion

Once again, the trade session is dominated by risk aversion due to concerns over the state of the European economy.

This will lead to traders avoiding high-risk investments in the foreign exchange markets. The Yen was one of the best-performing currencies out of the 16 major currencies due to speculations that the Greek crisis would possibly move into other EU countries, as well as countries outside Europe.

This positively impacted Japanese investment, making the Yen the best-performing currency among the 16 major currencies.

The descent of the Loonie rates is somewhat weakened due to statements in the U.S., which suggested that the interest rates will not be raised by the Federal Reserve in the short-term, allowing the Loonie to recuperate the earlier losses against U.S. Dollar.


Analysts stated that Greece continues to dominate the news with the budget crisis, which encourages risk aversion among investors.

The Loonie may drop further through international events, as there is little internal speculation that may positively impact the Canadian currency.