Sterling Digest, January 20 2013: Safety issues

Goodbye Europe. The Economist cover

Sterling has weakened considerably to kick off 2013 with several themes at play here. One is the fundamental fact that the British economy stands to enter a triple dip recession having ended 2012 with no growth. Secondly, the EU is looking  much more attractive to investors. While 2012 will be remembered as the year investor fled euros and parked their money in sterling and swiss francs, 2013 sees these same investors putting their money back in euros. Lastly, I have noticed that sterling is correlating to the USD much differently than it had in 2012. While a strong GBP saw a strong USD (and visa versa), that correlation is no longer. Now sterling is weak across the board with currencies of the stronger economies (CAD, AUD, NZD) leading the charge.

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