So after poor GDP figures and indeed poor data all round in January.. Where next for the Pound? Have the Bank of England tried to get a head start in the so called ‘currency wars’ we may be due to encounter? (Daniel Wright)

GBPEUR Rejected by 1.17 Price Level Again

The Pound has quite frankly had an awful start to the year with poor services and manufacturing data, retail sales and GDP figures being some of the most notable causes towards Sterlings current downward trend. We have seen major stores finding trouble which will only knock unemployment down further and confidence in the Pound is extremely low at present.

Some of the great gains we made against most majors in the last quarter of last year have already been wiped out and the ‘safe haven’ status of Sterling does not appear to be on any investors lips for the time being. Ever the optimist I personally feel we will recover however how long it takes is the million Dollar question right now.

Head of the Bank of England Mervyn King has already commented that he expects so called currency wars to happen in the future and I think all this doom and gloom for the U.K is giving us a head start before others get to make a move. I think the reason currency wars may come into play is because with certain currencies such as the Australian Dollar and Swiss Franc being so strong it will no doubt start to take an effect on exports and this can slowly start to damage an economy over time. What we may see in the coming month and potentially even years is monetary policies across the globe trying to counter act this problem, we have already seen the Swiss National Bank peg the CHF against the Euro and the Reserve Bank of Australia are seemingly happy to keep cutting interest rates (this generally will weaken a currency).

All in all we are set for an extremely volatlile year and the Pound needs something to start moving through the gears and gaining some strength again and the fact that triple dip recession will now be on the front page of every newspaper certainly will not help!

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