Sterling Digest, February 25 2013: hardly at extreme levels

• Posted by faithmight
• on February 25th, 2013

Sterling weakness accelerated last week and culminated in the UK loosing its AAA credit rating on Friday. Now that monetary policy is dovish, economic activity nil, and credit rating downgraded, sterling has entered this new week of trading with a trifecta of negativity. And yet traders are hardly short GBP yet. In fact, I don’t think we will have reached extreme levels of short GBP trades until, $GBPUSD trades at 1.4750, $EURGBP at 0.8900, $GBPAUD trades below 1.4500, $GBPCAD below 1.5400, and $GBPNZD below 1.8000. Until price gets to those levels, expect corrections to be short-lived as the weak sterling trade gains momentum.

• Fed and Bank of England head in different directions (FT)
• GBP: WHAT MAKES UK AND US DOWNGRADES DIFFERENT (BK Asset Management)
• Sterling Policy of Benign Neglect (City Index)
• The real rate of British inflation (FT Alphaville)
• UK Unemployment Data – Summary (Forex Live)
• The Fed’s Minutes Scare the Market (Crossing Wall Street)
• The UK must spend, lend and change to drive upturn in the economy (The Telegraph)
• Cable vs. FTSE (City Index) [chart]
• UK Inflation Watch: 10-Year Gilt Yield vs. GBP/USD and FTSE 250 (Distressed Volatility)

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