Tough Times for the Pound

An article on Bloomberg today notes that times are tough for the Pound and it cites several things that are much more expensive for Brits to do now than they were around a year ago.

The pound has dropped 18 percent against the euro and 24 percent versus the dollar this year as the Bank of England reduced interest rates and the U.K. economy slid into its first recession in 17 years. The pound bought 1.1173 euros today, falling for a sixth day against the euro, and money changers are charging close to one pound for one euro before commission.

“The pound is hopeless, it’s time to dump it,” said Ian Wright, 53, an upholsterer, as he waited to board a train bound for Antwerp in Belgium for a bachelor party. “All this British tradition stuff about keeping the pound is rubbish.”

If I were a fundamental trader I might be inclined to start fading the move based on such a negative sentiment...however, I'm not a fundamental trader and I would only short the pound at this point because it's been dropping pretty hard (don't fight the trend). Check out the weekly Eur/Gbp chart...no wonder the people in the article are so disgruntled with there nation's currency.
As you can see from the chart, this currency pair trends very hard and once it gets going, it keeps going. Although it's been steadily trending, articles like the one above provide hints that we may be getting closer to a top and to be on the look out for a trend reversal. Only time will tell.

Good luck out there.

TLT