Today’s shocking reversal in the dollar despite a solid rally in US equities and at least a temporary lull in risk aversion has put the pound back under intense pressure.
The ongoing banking crisis, falling home prices and rising unemployment are all helping weigh on the pound. The prime minister has made a very highly leveraged bet that aggressive government intervention via both fiscal and monetary policy will revive the economy but there are intense fears that should these policy prescriptions fail, the UK will be be paralyzed by a crushing debt burden.
Cable trades about 1.3700, more than 2 cents off intraday highs. GBP/CHF was bought heavily this morning but is now being dumped as the decline in risk aversion proved to be a mirage.
If momentum stays strong, trend lows for the pound are down at 1.3492, where we last traded at the end of January when the BOE began entertaining the notion of quantitative ease.