With the additional strength lately the pound is estimated to be 20% overvalued against EUR and the USD while holding terrible fundamentals. Any sign of rate cutting could put the whole thing to an end http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/12/12/cnster12.xml
no bubble at all, the mighty pound now reflects the offshore status that London is enjoying. Russian, Arabs all come to London. There is net buying of pounds. No way rates will be lowered as UK's real estate is bubbling. by the way, the Telegraph is a terrible conservative piece of trash with little hindsight on what's going on.
I think the Telegraph piece should be read first. It is easy to rubbish a paper but the piece clearly is not an editorial. Regards Morty
well, I've been long GBP versus Euro and USD since 96 and have made a killing, enjoying both the carry and the appreciation. The fundamentals are great. The UK has turned into a service economy. The manufacturing sector has become irrelevant. Flows, flows and flows again.
I dont know what you've been drinking. The UK fundamentals are just like the US, just smaller(current account, government debt, household debt, future hidden government liabilities). The place where they differ is that GBP is overvalued in PPP and the dollar is undervalued. Interest have been holding the pound due carry trades and market irrationality where inflation is good news. If the US has a serious slowsdown/recession next year and the UK economy is weak they will cut rates. I will probably go long EUR/GBP when they cut it
Commercials are record net short GBP - 98k contracts. Their short holding have increased from 60K to 136K since October.