The British pound has taken a unflattering position in the past few weeks, weakening me. Of the world’s major currencies, it was clearly the best, with only half a dollar weakening on the dollar and the euro by more than three percent.
The pound came under pressure due to the unflattering state of the British economy. It has been growing more slowly in the last quarter of last year, not traders.
At the beginning of the year, a number of sectors of the British economy came as warning signs, suggesting that growth in the coming quarters could be weak. The Bank of England quickly realized the problems. It, as the first of the large central banks, even lowered the outlook for GDP growth by 2010 from the original 2.2 percent to 1.3 percent, and a sharp correction was thus achieved for the outlook for 2011. Moreover, its fathers later indicated that if will continue the promise of the British economy to continue, again a loose monetary policy can not yet be ruled out.
This frightened a number of traders in the foreign exchange market, who began to sell the pound again in large numbers. The Bank of England, with its position, stood out, for example, from the ECB and the US Fed. These prepare the markets for the fact that the period of abundance of liquidity is slowly coming to an end and will now be replaced by the painful process of its withdrawal.
Traders did not stop getting rid of the pound even in the first week of the year, when he gave the saw from Britain a negative at first. According to pre-election polls, the leadership of the Conservative Party has sharply weakened before the Labor Party, which now loses only 5 percent to the Conservative. Elections are being held in Britain in May, and if it goes short, the United Kingdom is in danger of having a minority government for the first time since 1974.
The markets carried it very hard. So far, they have tolerated both budget steps (11.5 percent of GDP this year alone), because they expected the British government to face the unsustainable situation of public finances after the election. In the case of the names of the rulers, the bag could still melt away.
Out of fear of looming problems, British bonds came under pressure last week, and in light of the gradual stabilization in Greece, the attention of traders began to turn first to Britain, which the media began to compare with Greece and often compare.
Despite the difficult situation in the British economy and the need for normalization on the level of fiscal and monetary policy, Britain’s opposition to the Czech Republic and other problems in the euro area is still one big coincidence. It is the first pound, which is now the cheapest since last April and which has lost 14 percent against the euro, 32 percent against the dollar and even 57 percent against the Japanese yen since the crisis broke out in mid-2008.
The collapse of the pound at the end of 2008 has thus done a lot of work for British politicians, who, in exchange for the poorly impoverished British, now have a much more competitive economy. This is certainly not the case with political Czechs, Portuguese or Spaniards, who got rid of the possibility of adapting the economy through the exchange rate channel and now have to read painfully in cities where in the past they fled what is very unpopular and therefore difficult to do.
Although Britain’s problems remain high and it is not advisable to underestimate them, it is primarily the euro area and its weakest links that may further disturb the markets in the next month. The Czech, Portuguese, or Spanish economies cannot help themselves, and the problems in these countries have not even really taken over the problems in most countries.