Forex Flash: Oliver Twists´s Pound?

Sebastien Galy of Societe Generale feels that the pound is likely to continue falling, pretty much with the blessing of the UK’s MPC and the Chancellor.

He sees that in the Currency Wars‛ the UK is firmly on the side of the ‘quiet debasers’ who don’t intervene or talk their currency down loudly, but smile when it falls and talk positively about what a weaker currency does to rebalance the economy and tackle the trade and current account deficits.

However, Galy writes, “That doesn’t mean it’s a good idea. Inflation is imported and hits consumers, while the UK offers increasingly price insensitive exports that are heavily dependent on Europe. If the hope is that a weak pound will aid recovery, we suspect that hope will be disappointed for quite a long time. If the hope is that it will result in a weaker pound, it will succeed.”