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Holding Short GBP/USD

Holding Short GBP/USD

2012-01-26 17:43:00
Christopher Vecchio, CFA, Senior Strategist
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We continue to hold our short GBP/USD position despite the pair rebounding off of technical support. Fundamentally, the Pound is a mess: declining industrial and manufacturing production; negative growth; deflation is a threat; unemployment remains high. The British economy is stagflating, and without a global turnaround, it is doubtful the Bank of England can engineer a recovery.

The Bank of England, over the past few weeks, has suggested that more help may be coming down the pipeline for the economy. While the U.S. Dollar has taken a beating the past few days, I remain confident that the GBP/USD will fall back as market participants 'get over' the Fed's policy decision yesterday. These are the facts:

- the Fed Funds rate was expected to remain low for "an extended period."

- no more quantitative easing measures have been announced

- the inflation target will hinder the Fed's ability to inject substantially more liquidity

- British growth has turned negative; things are getting worse

Any other trade updates can be viewed in the real time news feed, or you can follow me on twitter at @CVecchioFX for trade thoughts and other macroeconomic musings.

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