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Sterling 'has fallen out of favour'

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Sterling has fallen out of favour'

Confidence towards sterling among investors is waning, experts have stated.

According to HiFX, the currency has "fallen firmly out of favour" as an alternative to the euro over the last few months.

This, it said, indicates that investors are becoming much less concerned about the risks posed by the eurozone.

Andy Scott, premier account manager at HiFX, commented: "Talk of a break-up or countries exiting the euro has all but ceased and Spanish and Italian borrowing costs have dropped dramatically to levels seen as sustainable.

"This has contributed to the euro gaining over three per cent against the pound so far this year."

Mr Scott pointed out that the single European currency has also gained more than seven per cent since reaching its lowest point in almost four years during July 2012.

He went on to note that stability appears to be returning to the US economy, therefore providing the dollar with support.

This, he said, is despite the recent fiscal cliff negotiations, which he described as "fraught", as well as the prospect of further talks over its debt ceiling limit.

Mr Scott stated that the British government has struggled to meet its target on deficit reduction, while the economy is yet to "maintain any growth".

He also noted that the faltering economy may prompt the Bank of England to step up its quantitative easing programme, while credit ratings agencies could potentially downgrade the UK's AAA rating.

Mr Scott said this is impacting on the strength of the pound and predicted that any surge in buying interest in the near future is unlikely.

This comes shortly after the Treasury blamed the poor performance of the British economy partly on international pressures. A spokeswoman for the department told BBC News that the weak global environment has "exerted a major drag" on growth in the UK.

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