Online Forex Trading
Amongst the major currencies, sterling is once again stealing the limelight.
Recent comments from Mervyn King and from BOE Chief Economist Spencer Dale, to the effect that a depreciation of sterling would be beneficial to the economy, are very significant. These gentlemen will be only too aware of the effect on the markets that such comments will have.
Combine this with the comments in a recent BOE paper to the effect that sterling’s long-run equilibrium level may have fallen, and the markets can already hear that classic death-knell combination for a currency, i.e. a loose monetary, tight fiscal environment, which will in all probability unfold over the next year, as a new UK Government is forced to make savage spending cuts, and the BOE, (in part because of this tight fiscal stance), has to keep rates at rock-bottom and very possibly has to print more money, via increased QE.
Sterling may be entering a period of prolonged weakness, both against the USD and against the EURO, with 1.5500 and 0.9500, respectively, being targets within the next month or two. If, independently, the USD enters a period of strength, due to the increase in risk aversion that would accompany a decline in major stock markets from their current rather over-stretched levels, then the move against the USD would be even more dramatic, i.e. to 1.5000, or below.
