Sterling in freefall

By Edward Harrison On Aug 14, 2008

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.

Source
Graph via Exchange-Rates.org

Britain currencies

Edward Harrison 7783 posts 575 comments

Edward Harrison is a senior Editor at Bloomberg. He is also the founder of Credit Writedowns newsletter, a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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