Sterling Spreads Continue to Struggle
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When the forex markets don’t like you they really don’t like you.
Sterling continues to weaken as the prospect of either a renewed Labour administration or a weakened coalition gets more likely by the hour.
The Lib Dems have announced that they want to ban bank bonuses and implement the ridiculous ‘Robin Hood tax’.
The really worrying thing is that one or both of these might be one of the more stupid payments they will extract to gain their vote for power.
It is difficult to imagine a more destructive policy promise for the UK.
Banning bonuses would immediately lose the entire investment and international banking infrastructure built up over several centuries.
While the ignorant might say “so what?” the more prudent would point out that the invisible revenue generated for the UK by the square mile is enormous compared to the number of people employed.
The UK is in danger of driving out the very people that it will most need in the years ahead.
The Pound has dropped below $1.4900 this morning following on from yesterday’s dramatic action.
The low came in an awful period between 09.30 and 11.00 yesterday was $1.4780 as rumours abounded of huge fund liquidations and rights issue currency hedge sellers, for the Pru/AIG deal, swept through trading rooms.
To be fair there does seem to be some support below the $1.49 mark in early trade and dealers are buying in numbers. Unfortunately this is unlikely to help much as the world and his dog seem set against poor old Sterling once again.
What started out a few weeks ago as an attack on the Euro has mutated into the possibility of turning into a classic Sterling crisis.
The best policy for currency market traders is probably to have ‘no policy’ as crosses swing wildly this way and that on a moments notice. In particular, the Cable cross has fallen fifty pips, rallied fifty pips and fallen back 40 pips in the time it has taken to write the last two paragraphs.
Support in Sterling, there is some of course but difficult to find just now, is at $1.4850 and $1.4770 with resistance at $1.4970.
The problem is that the recent price trend might seem to indicate a renewed attempt to move back to the $1.4380/1.4400 level another 5 cents lower.
European equity markets continue to climb as their currencies weaken, although the overall momentum to the upside does seem a tad weary.
For Global investors UK equities must appear ludicrously cheap. Unfortunately it would be a brave investment advisor who recommended Sterling assets at this moment in time.
Forex Spread Betting Comparison
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| GBP / USD Daily - Spread Size |
2 |
2 |
2 |
3 |
0.8 |
2 |
3 |
2 |
| GBP / USD Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| GBP / USD Future - Spread Size |
8 |
12 |
8 |
8 |
- |
8 |
16 |
8 |
| GBP / USD Future - Min Stake |
£1 |
£1 |
£1 |
£1 |
- |
£1 |
£1 |
£1 |
| EUR / GBP Daily - Spread Size |
1 |
2 |
1 |
1 |
1 |
1 |
2 |
1 |
| EUR / GBP Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| EUR / GBP Future - Spread Size |
6 |
10 |
6 |
6 |
- |
6 |
17 |
6 |
| EUR / GBP Future - Min Stake |
£1 |
£1 |
£1 |
£0.5 |
- |
£1 |
£1 |
£1 |
| EUR / USD Daily - Spread Size |
1 |
1 |
1 |
2 |
0.8 |
1 |
2 |
1 |
| EUR / USD Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| EUR / USD Future - Spread Size |
8 |
12 |
8 |
8 |
3 |
8 |
12 |
8 |
| EUR / USD Future - Min Stake |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
| USD / JPY Daily - Spread Size |
1 |
1 |
1 |
2 |
0.8 |
1 |
2 |
1 |
| USD / JPY Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| USD / JPY Future - Spread Size |
8 |
12 |
8 |
10 |
- |
8 |
14 |
8 |
| USD / JPY Future - Min Stake |
£1 |
£1 |
£1 |
£0.5 |
- |
£1 |
£1 |
£1 |
Comparison Notes
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'Sterling Spreads Continue to Struggle' edited by DB, updated 02-Mar-10
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