Superpound is heading for a fall

UK holidaymakers are taking advantage of the strong pound by heading stateside to bag cheap deals on the high street. But how long will things stay this way?

"Is it a bird? Maybe even a plane? No, what you see is Superpound, and you may even have some in your wallet," says David Smith in The Times. For the first time since 1981, sterling has breached the $2 level and UK holidaymakers are taking advantage. While British tourists head stateside to bag cheap deals on the high street, Americans heading to London are having to spend the equivalent of $8 for a Starbucks coffee. But for how long will it stay that way?

Fears that America's subprime woes might feed into the rest of the US economy, leading to a credit crunch and a resulting recession, are spooking investors holdings US dollar-denominated assets. "Housing fundamentals are very negative and weigh on the dollar," says Richard Franulovich, a senior currency strategist at Westpac Banking Corp, on Bloomberg. Last week, Ben Bernanke added to the despair, telling congress that there will be significant losses on loans to homeowners with bad credit. And this week's news that homeowners with good credit records are falling into arrears too will only make things worse.

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