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Thursday 4 December 2008

Bye bye Sterling (update)

Rather than watch the news to see what the Bank of England decision on interest rates was today, I watched the Dollar/Sterling rate. As I saw Sterling recover slightly from around 1.45 to 1.46 at or just after noon I was pretty sure that as per my earlier prediction
"I presume that the markets have already factored in a 1% drop in interest rates but are worried about that becoming 1.5%. So if rates drop by 1.5% you can expect Sterling to drop even further, if they drop just 1% then a small recovery may be in order."
there had been a 1% reduction, and I was right.

So expect Sterling to trickle upwards for a short while but as soon as the traders realise that 1% cut or not, the economy is still tanking badly, then you can expect Sterling to fall further. As I said this morning
"Sterling is heading for 1.30 against the Dollar and maybe beyond."

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