Carney May Want Sterling to Decline to $1.37

Money manager at the Pacific Investment Management Co., Michael Amey feels that Pound, the major currency of UK may drop to a 4-year low figure of $1.37 during the tenure of Mark Carney as the governor of the Bank of England. The incoming governor will be taking helms from the retiring governor Mervyn King in July and he is possibly going to see Sterling experience decline. Hence, the clearest trade at this point of time should be to sell Pound, as mentioned by Amey. However, a similar move against Euro, the major currency of the Euro region, is probably not going to be achieved as the common currency bloc is facing some challenges at this point of time. In 2013, Sterling has experienced a tumble of around 3% so far, becoming the 3rd worst performer among the major currencies, after Japanese Yen and Australian Dollar, as far as the Correlated-Weighted Indexes are concerned.

The depreciation that Sterling is expected to experienced will be on a trade weighted basis and this is probably be of around 10%-15%. Carney is expected to make amendments so that Sterling does not go up any further and according to Amey, Carney will actually like to see a drop in Sterling. Hence, similar kind of policy announcements should be expected and hence, under the current circumstances, $1.37 does not look like a big thing at all.

On today, the Sterling went ahead by 0.5% and the currency is now priced at $1.5110. At one point of time, Sterling went down to $1.5009, marking its lowest figure since 14th March. As far as the performance of 2013 is concerned, Sterling has gone down by 7% against USD. The last time when Pound was trading at $1.37 was in March, 2009. On the other hand, against Euro, Sterling is currently priced at 85.55 Pence per Euro. Since the start of the current year, Sterling has tumbled by 5.1% against Euro.

UK economy was on the verge of a triple dip recession, however, things somehow took a better turn due to the stimulus measurements taken by the Bank of England and also the better than forecasted results in some of the sectors. It is now to be seen that how Carney handles the British economy and if he introduces some changes to the economic policy of this country or not.