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Article: Pound pessimism is unwarranted. (pound devaluation)
- Article from:
- Futures (Cedar Falls, IA)
- Article date:
- November 1, 1997
- Author:
CopyrightCOPYRIGHT 1997 Summit Business Media. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The pendulum of currency market sentiment has swung too far to the negative side of the pound, especially against the D-mark. The British currency, a high-yielding darling of speculators in the first half of 1997, experienced a recent sentiment swing to a pessimistic extreme when it appeared monetary tightening was about to knock the British economy for a loop.
Dollar rally = pound rally
The pound is Europe's dollar proxy due to strong trade and financial market ties between the United Kingdom and the United States. That explains the correlation between the pound/D-mark rate and the dollar/D-mark rate (see chart). The dollar was weak in 1994 and early 1995, ...