HiFX: 2009 looks "gloomy" for the pound

The year ahead looks "gloomy" for the value of the pound against the euro, it has been suggested.

In the UK, the economic deterioration is picking up pace and sterling traditionally struggles at times like this, explained HiFX.

Although the currency is becoming undervalued, this does not mean that markets will automatically buy or sell currencies towards the "equilibrium measure", stated the senior currency strategist at the company.

Bob Munro said: "In the short-term we therefore resort to respecting the underlying trend, meaning sterling could easily continue to fall against the euro."

Between April and November last year, the pound stood against the euro at around 1.25 but week after week it continued to fall to "unpredicted lows" at the end of 2008.

Foreign exchange traders suggested that the UK's reliance on the housing market and financial services will make the recession harder for the country, added HiFX.

The company operates in Europe, North America and Australasia and helps people buy and sell foreign currency.