Pound Hit by Finacing Fears

Last updated 1/5/2010 4:19 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Pound tumbled from the start of the European open today losing more than a cent as it traded nearly 200 points lower than the highs set yesterday, after an article in the UK Telegraph suggested that UK may face a sovereign debt crisis as the year develops.

The Telegraph quoted the large US fixed income investment house PIMCO as saying that they will not be buyers of UK gilts because of the massive issuance coming out in 2010. Paul McCulley, a managing director at Pimco, said: "We are currently cutting back in the US and UK because... supply and demand dynamics are likely to be negatively affected as borrowing rises and central bank buying declines."

Cable was also kneecapped by yet another rejection by Cadbury of the Nestle takeover offer that weighed negatively on M and A flows. The rise of risk aversion weighed heavily on sterling which is highly sensitive to risk flows given UK economic dependence on capital markets.

The fears of a financing crisis is the one factor that could scuttle the nascent recovery in UK economy especially at a time when the BoE considers the possibility of exiting its 200 Billion pound quantitative easing program.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.