Sterling in freefall
Sterling has dropped 10 days on the trot, the most in 37 years. What does that tell us? Well, it tells me that people think the BoE will be cutting rates at some point soon. The Pound was over $2.10 in October 2007. Now it trades for $1.86.
Base rates in the U.S. have been cut repeatedly in that time frame widening the interest rate differential between the U.S. and the UK. The Pound is weak because currency traders know that the UK is headed for recession and that will mean interest rate cuts. Apparently, the BoE doesn’t think inflation is a problem. Obviously, markets don’t either.
Graph via Exchange-Rates.org