The weeklyFiX digest: Sterling plumbs the depths
At the start of 2008, Paul Day, deputy head of research at MIG Investments, predicted that sterling would be the dog of the FX market in 2008. He reckoned that it would plunge to parity against the euro – a prediction that many thought singled him out as being barking mad.
Technically, there might well be a currency that has performed worse, but there’s no denial that sterling has been giving a right kicking against the yen, dollar, Swiss franc and euro. As sterling plunged towards parity with the euro, the UK press went to town. On December 15, euro/sterling was quoted as high as 0.9022, which equates to almost exactly the 2.1675 historical sterling low against the Deutschemark, set way back in 1995. Whether it can recover from here looks doubtful, although as strategists from BNP Paribas point out: "Although the news from the UK has remained particularly negative, we now expect the outlook for the eurozone to deteriorate just as rapidly. In the era of relative devalue trading, it’s all about which ‘asset’ stinks least."
Published in the weeklyFiX 05 Dec 2008