Sterling Drops To Near Term Lows Against Euro, Swiss Franc, SEK & NOK

Published: Tuesday, 29 January 2013 09:00 BST - Written by Ben Hughes

STORY LINK Sterling Drops To Near Term Lows Against Euro, Swiss Franc, SEK & NOK

Yesterday’s session saw the Pound Sterling lose ground against almost all of the other sixteen most-actively traded global currencies, with the notable exception of the risk-sensitive South African Rand. The Pound sank to a new 13-month low against the euro, but also slumped to fresh near-term lows against other European currencies including the Swiss Franc, Swedish and Norwegian Krones.

The Pound increasingly appears to be resembling a resident of death row awaiting the inevitable day to arrive. That day will be the day when one of the world’s three major credit ratings agencies, all of whom have placed the UK economy on ‘creditwatch’ in recent months, announces that it is stripping the UK of its highly-valued AAA credit rating.

The market’s reaction to such an announcement by Moody’s, Fitch or S&P would be likely to trigger a severe bout of selling pressure on the UK tender, following comments by British Prime Minister David Cameron earlier this month describing the retention of his nation’s top notch credit rating as ‘hugely important’. Cameron went on to stress that a UK debt downgrade would make it more expensive for Britain to access ‘cheap credit’ in the global money markets, which it desperately requires in order to continue servicing its mammoth £1 trillion + national debt.

It is difficult to predict when the Pound will next receive a boost – today represents a blank day for British data releases, so the prevailing pall of gloom is likely to continue to hang over it. Perhaps the best chance of good news for investors holding the Pound could lie in the very fact that the UK currency has performed so stunningly badly over the past two months. From a technical analysis perspective, Sterling is beginning to give off signals that it has been oversold. If the downward move for the Pound against Europe’s other significant tenders has indeed run out of momentum, then a minor correction may be due for Sterling pairs.

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