We are referring to today as ‘Black Tuesday’: the British pound has topped USD$2 for the first time in 15 years.
The last time this happened was in September of 1992, when currency speculators (particularly George Soros) pushed the pound off of the European Exchange Rate Mechanism. Mr. Soros did pretty well…making over a USD$1 billion on this speculation. Not too shabby…
The U.K. Treasury estimated the cost of what was dubbed ‘Black Wednesday’ at 3.4 billion. And in the months following that day, the pound fell significantly.
MarketWatch reports that the pound climbed up to USD$2.0074 yesterday before eventually settling at USD$2.0049 on inflation reports. According to Martin Slaney, analyst at Global Forex Trading, “Inflation figures came in significantly higher than virtually everyone in the market was expecting, and a push through USD$2 was inevitable after figures like this. A [interest rate] rise at the May meeting is now a certainty, and some are factoring in a half-point rise.”
Experts are saying that the pound could still have a ways to go – some are even predicting that it could rise to USD$2.10 by the end of the year.
So, what does our currency counsellor, EverBank’s Chuck Butler, think about all of this? Well – he’s not surprised:
“You know, a couple of years ago, I was receiving hate mail daily. Some awful things were said to me, about me, and so on… All because the dollar had taken a technical, or mid-weak dollar trend, pause. Today, I feel vindicated. I said two years ago that the pound sterling would get to 2… And today, it’s there!”
The Daily Reckoning Australia