British Pound As Sick as Dollar

The British Pound Sterling seems to be as every much as sick as the US Dollar.

And why not? It seems that our British cousins have their own subprime mortgage crisis, raising credit card debt delinquencies, slow down in the economy, and troubled housing market to deal with.

After trading as recently as November 2007 at 2.1000 the Pound headed south and closed on Friday, January 11, 2008 at 1.9570. That’s a pretty dramatic reversal, especially during a time period when the US Dollar has been so weak.

It seems that over the past few years the British have been as credit crazy, perhaps even more so, than their American cousins. Now that lenders want to be repaid by borrowers who do not, and in some cases, never did have the ability to repay, the cousin’s currencies are sick together as financial markets on both side of the Atlantic sink under the weight of massive losses and writedowns by financial institutions.

Selling every rally in Pounds has been a profitable play over the past few months. I expect that as long as the credit crisis is overhanging the financial markets, which will likely be for at least all of 2008, the Pound will continue in a downtrend.

However, the Pound is especially volatile, so trading Pounds is not for the faint of heart. The long term trend may be down but the daily price action has a lot of sudden reversals and whipsaw action that can make one question ones position.

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