Five reasons to sell sterling
Britain's economic performance is not as good as it has been painted, and there is a lot of political uncertainty as well
By Buttonwood
EVERY country, bar America, seems to want a weak currency at the moment to hold off deflation. Some, like the Japanese, actively seem to be pushing the currency down. Sterling may have fallen off the radar but it has five key weaknesses.
Political uncertainty. Despite last night's by-election result, UKIP probably won't win many seats in the May 2015 election but it is frighteing the other parties, and prompting them to question their policies and their leaders. The Tories may lose seats to Labour as a result of UKIP's surge but Labour will lose just as many seats to the Scottish National Party, as things stand. Paddy Power, the bookmaker, is pointing to seat totals of Labour 287.5, Conservative 283.5, LibDems 28.5, SNP 21.5 and UKIP 6.5. No two parties (save a highly unlikely grand coalition of the big two) could form a majority under such an outcome (326 seats are needed). So there could be two elections in 2015, plus a possible referendum on exit from the EU in 2017. If Cameron fails to win re-election in May, he could be out as leader of the Tory party and replaced by a Eurosceptic. None of this will be appealing to international investors.
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