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Problems Mount for Pound Sterling Following Vince Cable Forecast

November 16, 2015 - Written by Ben Hughes

Paris Attacks to Dictate Currency Market Trade Today, GBP Declines

Movements for the Pound Sterling (currency : GBP) against the other sixteen most actively traded currencies will be played out against the tragic backdrop of Saturday's terrorist attack in Paris.

Over 120 civilians lost their lives in a sustained assault from three separate teams of attackers and the euro (currency : EUR) may endure some selling pressure in the early part of the week.

Pound Sterling to Hold Strong against AUD and NZD despite Cable Warning

Elsewhere, weekend comments from former UK Business Secretary Vince Cable have the potential to alter the relative value of the Commodity Dollars this week.

Cable earned his reputation as a sage of the markets during the lead-up to the 2007-09 global financial crisis when he was one of the few policymakers to warn of the impending meltdown.

The British politician warned in a newspaper article on Saturday that ‘severe economic storms’ lie ahead and went on to suggest that China poses a real threat to the global recovery, stating that, ‘in the short run it will bring economic grief.’

If his words prove to be prescient, then analysts forecast that the Pound Sterling will record strong gains against the Australian Dollar (currency : AUD), New Zealand Dollar (currency : NZD) and Canadian Dollar (currency : CAD).

However, Cable saved his strongest approbation for the UK economy, describing the domestic situation as ‘precarious and unbalanced.’

He pointed to two danger areas in particular – the level of UK household indebtedness with a national debt to income ratio which currently stands at 145% - and an increasingly evident property price bubble.

Sterling to see Volatility on October's Consumer Price Index

The next UK risk event of note comes tomorrow morning with the publication of October’s Consumer Price Index inflation data.

Another showing of below zero per cent for the year-on-year figure will increase fears that the British economic picture is deteriorating and that Stagflation is setting in. Such an outcome is forecast to hit Sterling hard in the short-to-medium term.

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