Sterling's "resilience" highlights the struggles faced abroad

Author: Justin Low | Category: News

For all the doom and gloom about Brexit and the UK economy, sterling continues to shine brightly


Among the major currencies, is there no safer/better place than sterling at this point?

In Europe, we're seeing flagging growth which could provide a hindrance to the ECB when they start to look towards normalising monetary policy. And there's also the real question of inflation, particularly when the headwinds to both the economy and inflation could be brought about by a stronger euro.

In Japan, the BOJ continues to sit on its powerful monetary easing policy throne - and with equities holding up the yen continues to trade a little weaker for the time being. That, and the fact that the trend in the yen's strength (lower highs, lower lows in USD/JPY) being broken suggests a more corrective move for the yen at the moment.

In the US, there's still continued worries about the dollar with regards to the twin deficit and the trade spat with China alongside geopolitical risks with Russia is certainly not helping either. There's so much uncertainty surrounding the dollar that even though the Fed is raising rates, it's hard to imagine a clear picture for dollar strength currently.

Putting aside the commodity complex, where the loonie also struggles on NAFTA and the aussie is being caught in the crossfire of the China-US trade spat, investors seem to believe going long sterling is the perfect anecdote.

That is not to say the UK is without its own struggles. Brexit woes still loom large in the background, UK consumers are still struggling, and the economy is plagued by "bad weather" to start the year.

But currently, investors are looking past all of that, and with the BOE set to raise rates in May it seems that every one wants in on the action while it still lasts.

That and the fact that April seems to be every one's favourite month to go long sterling for some reason or another.