Is sterling the currency of choice, now?

In light of the recent events all over the globe having a direct effect on the currency exchange markets, let us have a closer look at the current “star” currency, the Great British Pound Sterling…

What made us focus our attention on the British pound was the fact that during the past few days this particularly currency has soared. This rise culminated on Tuesday when the GBP reached a year-to-date high of $1.626, a remarkable 9.4% rise on the low figure of $1.486 which was recorded in early July 2013.

Some analysts were quick to jump up and claim that such impressive performance by the pound sterling will not be sustainable and that it will most probably not continue. They base their rationale mostly on concerns that the recovery experienced in the UK economy is falsely based on yet another housing bubble, achieved though government intervention in the form of “help to buy” policies, and that there is no real economic growth in the UK economy, other than that led by consumer demand. Also pointing out the fact that the U.K.'s current-account deficit hit 5.5% of GDP in the first quarter of 2013, these experts remain pessimistic about what the future holds for the pound sterling.

Trying to bring in some new perspectives and keep all of you, binary options online traders up to date and up to grabs with the real issues in the world markets, we propose that, taking an array of factors into account, the pound sterling, is emerging, at least in the short to medium term, as the “go to currency” for investors to resort to.

The main thread behind our argument is quite simple and perfectly clear, the GBP is better off than all its main competitors, namely the US dollar, the Euro and the Yen. Why is that?

Well, let us first dismantle the case for the dollar. It is true that many were expecting that the dollar would be lifted on account of the recovery of the American economy and less dovish policies by the U.S. Federal Reserve. However, instead of that, we now have the shutdown of most operations of the American government, due to the debacle between the Congress and the Senate, the row over the “Obamacare” bill and the absence of a budget, without which things have come to a standstill. What is worse is that the politicians in Washington appear either unwilling or unable to solve this mess fast enough, with a lot of money being lost every day that passes. What is even more alarming is the looming date of 17th October, when if lawmakers in the US do not raise the country’s debt limit, a catastrophic default will occur, which will have devastating effects not only on the USA but all over the world.

Turning now to the Euro, let us say that the Italian political crisis that is evolving currently is yet another hurdle in a bumpy road. And even if the Italian Prime Minister manages to secure a vote of confidence and elections are avoided, all these is another grim reminder of how volatile things still are in Europe, especially in the countries of the south, which face the biggest economic problems. The possibility of a third aid package for Greece has yet to be clarified, while in Germany the negotiations to form a new government appear to be protracted and will require more time and compromises all around. Against this backdrop, unemployment data show a worsening of the situation across the European continent, especially amongst the young and the man at the helm of the all-mighty European Central Bank, Mario Draghi does not appear to be ready to take decisive action to make things better.

Last, but not least, the Yen, which might be recording gains to the US shutdown, especially against, however, it is our view that the recent developments in Japan, with the Prime Minister announcing his plans to raise the consumption tax to 8% from 5%  starting in April 2014, with a further 2 % increase in 2015, might prove problematic as it appears to forget the hard lessons learned when such an increase was imposed again back in 1997, and also appears to have underestimated the factor of inflation.

 

So, now you have the facts and our opinion. By no means is an investment encouragement, but a well informed and up–to-date binary options trader bound to be far more successful than the ignorant one.

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George Milios

George Milios is the founder of onlineforextrading.net, the binary options and forex news portal which is dedicated to providing you with all the information you need to successfully trade.

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