nobody ever went broke shorting the pound

Foreign Exchange

Outlook for Pounds Sterling

The pound to US dollars staged a correction yesterday on perception that it was oversold, rising from a low of 1.3616 around noon to 1.4020 by the US close, but it couldn’t hold the level and slipped back to 1.3724 so far today. The low yesterday was a 23½-year low. The pound to euro, pound to yen has fallen to a multi-year low too, with a sense of crisis pervading the market.

According to Bloomberg, Merrill Lynch is saying that the pound's downfall reflects a perception that it will receive a downgrade to its Triple A rating. As noted below, the French FinMin complained about the British not being "efficient" in managing the pound better.

Tomorrow we get the Q4 GDP estimate, probably a drop of 1.2%, and on Feb 5, the Bank of England is likely to cut rates again by 50 bp to 1%. So much bad news is swirling around sterling that you have to wonder when it will be perceived as overdone. Having said that, the old saw has it

"nobody ever went broke shorting the pound."

This is not true, of course, but it is true that the bottom of the standard error channel is under 1.3000.

Bye For Now

Barbara Rockefeller
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