FT.com.............no FT no idea 😛
Sterling is vulnerable to reversal of fortune
Pity the Bank of England. The central bank has been assailed for keeping interest rates at emergency levels while inflation has hit 3.7 per cent. Worse still, consumer prices have been rising at or above the upper limit of the Bank’s 1-3 per cent target range throughout 2010.
But do not pity sterling bulls. Foreign exchange investors have bolstered the pound this year on the expectation that interest rates will soon be raised. Yet it remains far from clear if the Bank’s Monetary Policy Committee will take such a step. Neither is it clear increasing interest rates will actually benefit sterling given the fragile outlook for Britain’s economy. As a result selling – not buying – sterling is likely to be one of this year’s big ‘macro’ trades in the currency markets.