At the next general election in Britain, it is estimated that close to 50% of all present sitting MPs will lose their jobs because of the ongoing scandal regarding expenses. This means that the next generation of parliamentarians will be highly inexperienced. If that was a company stock, I think you would be on ‘hold’ if not on ‘sell’. With this as a backdrop, cable has risen from 1.45 to 1.65 in a very short space of time. I guess it just goes to show the power of flows in the FX market but eventually fundamentals will resume their rightful place.
At some time the market is going to start getting rightfully nervous about buying sterling with abandon. Judging by price action overnight, perhaps the time has come.
