According to Ian Stannard of Morgan Stanley in London, the UK economy is not supported by brilliant fundamentals, but the current safe haven status is due to the increased political uncertainties in the Euro-zone. He also added that the pound has an advantage over other safe haven currencies like the Swiss Franc because the asset market is more liquid. He warned that the strong pound is likely to hurt exports hence the advance might backfire.
Most traders are choosing the pound as the Swiss Franc which was the choicest in 2007, has been held under the 1.20 cap set by the National Bank. This is despite Britain’s economy falling into second recession since 2009 due to the spending cuts proposed by UK Prime Minister David Cameron. The UK economy is expected to expand by 0.6 percent while the euro region is expected to contract by 0.3 percent. Five countries in the euro zone have gone under recession ranging from Greece to Netherlands.
The sterling pound has strengthened by 0.2 percent against the euro to trade at 80.22 pence due to political situations in Europe. The Great Britain Pound fell 0.1 percent against the dollar to trade at $1.6058. The Bank of England decided to put a hold on its quantitative easing program amid threats of inflation.
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