Currency - GBP / US Dollar

Since the Pound dropped below $1.48 in May, we have seen three attempts for it to break back to higher levels and on each occasion it has failed. Overall, Sterling has done rather well in this period but the US Dollar still has a great deal of allure as a safe place for investors to lodge their funds while problems rage in Europe and while China signals its plans to slow the Chinese and therefore to some degree, the global economy. Sterling gained after the Prudential bid for AIA, the Asian insurance company, fell apart; removing a potentially massive Sterling selling trade to fund the deal. It has remained relatively strong as problems elsewhere have flattered the UK and as traders have warmed to the new UK government’s plans to tackle massive government debt early on in their reign. However, unless the pound can push above $1.48 and retest the psychologically significant $1.50 level, all of this will be of no avail and a fall back to $1.43 is highly likely.