The dollar plunged to another record low against the European single currency yesterday in the face of new US recession fears.
In morning deals, the euro surged as high as $1.5088, after smashing through the $1.50 barrier for the first ever time in US trade on Tuesday.
Global Insight analyst Howard Archer said: ‘The euro is trading above 1.50 against the dollar for the first time since the eurozone came into existence in January 1999.
‘This is primarily a consequence of the dollar being undermined by further weak US data heightening concerns over the US economy and reinforcing expectations of additional interest rate cuts by the Federal Reserve.’
The weak US dollar and concerns that OPEC could cut output next week were behind a record surge in crude oil prices to above $102 per barrel yesterday.
New York’s main contract, light sweet crude for delivery in April, touched an historic $102.08 per barrel in electronic deals.
Brent North Sea crude for April delivery struck an all-time peak at $100.53p.b.
Meanwhile there were warnings that the traditional weekly report on crude oil stockpiles in the United States for last week could spark another move higher, with $105 dollars per barrel on the horizon.
The news came as Bank of England deputy Governor, Rachel Lomax, warned that the UK faces high inflation caused by ‘a remarkable period of soaring commodity prices’.
Warning that the outlook for the UK economy had ‘changed dramatically’, Lomax said that the ‘real risk’ facing the Bank’s Monetary Policy Committee ‘is that a further period of above target inflation, prompted by a cost shock over which it has no immediate control, will lead people to revise their expectations about future inflation, and to act accordingly.
‘This will make it more costly to bring inflation back to target.’
Meanwhile, Alchemy Partners boss Jon Moulton warned a private equity industry conference that the economic downturn could expose reckless practices that have left many firms saddled with too much debt and investments that were made without proper due diligence.
He warned at the opening of the annual Super Return private equity conference in Munich: ‘The industry needs to prepare for bad news.
‘There will be large private equity failures this year and next, and press and politicians will get on to us.
‘Companies will go bust and get into trouble . . . We have got some savagely leveraged companies out there.’
• Second news story
LABOUR TO DRIVE SICK BACK TO WORK
‘The market has no place in the welfare state,’ a Public and Commercial Services Union (PCS) spokesman told News Line yesterday.
He was responding to reports ahead of Work and Pensions Secretary James Purnell’s statement today that he plans to implement the recommendations of government adviser, investment banker David Freud, in full.
These include handing out £50,000 to private companies who drive people ‘into work and off benefit’ for 18 months.
Freud has claimed that only 700,000 of 2.64m incapacity benefit claimants are ‘genuine’.
The PCS spokesman added: ‘The result will be private sector companies placing the easiest to help into jobs, while the most needy are forgotten about.
‘This dogmatic approach in the blind belief that the private sector holds all the answers fails to recognise that the skills and expertise for helping people back into work resides in the public sector.’
In a previous speech to businessmen at the Social Welfare Foundation last January 28, Purnell made it clear: ‘Our goals are ambitious. One million people off incapacity benefit. 300,000 more single parents at work. One million more older workers.’
He added: ‘To that end, we will follow through on David Freud’s groundbreaking report on reforming the welfare system.
‘That means using the best providers, whether they are from the private, public or voluntary sectors. I want to create an effective and growing market for these services.’
Purnell stressed that ‘those who can work will be obliged to look for work or train for work and if they do not then, they will face sanctions.’
Meanwhile the Department of Work and Pensions is calling on employers to participate in ‘Local Employment Partnerships’, described as ‘an exciting new collaboration between government and business to tackle the increasing recruitment and skills challenges of our labour market and economy.’