The currency blog

Sterling again takes the lead today as the “pound gets pounded”, It`s very difficult to put a forward a case for buying Sterling at the moment when so much negativity continues to undermine it. One thing to bear in mind is only the UK and US  have expanded their money supply by over 100 % in the past 18 months and both have interest rates at near zero. It’s no surprise then that both currencies are being used to fund positions in high yielding currencies, and will continue to remain under pressure in the coming months. Key levels to watch Gbp/Euro 1.0685 break this and we could see parity before the end of the year.

News over the weekend was a bit gloomy on the Sterling and Dollar front with continued talk of UK rates staying below 2% for some considerable time yet with the added prediction of the currency dropping below 1.4000 against the Dollar and to below parity against the Euro. The Dollar was similarly put on the back-foot by continued speculation of reserve divestment although The Times did sum up this scenario quite nicely by pointing out that talks amongst the Middle East nations on using Euro more has a target date of 2018 - as the paper says, ‘The Dollar is going to be around as the world’s reserve currency for a long time’. Other than that, the press was full of asset sales and other cash raising exercises, those going ahead, planned and speculated upon.

Economic news out of the UK this week in the form of unemployment data and CPI will hold the key to further moves; if it comes in better than expectations then you could see a strong oversold rally for Sterling. If it comes in below then the pound  really could  be in for a pounding.

Discuss on this on the Currency Exchange Forum