From the July 01, 2010 issue of Futures Magazine • Subscribe!

Pound pounded

The pound took a beating in late April before rising a bit in early June. Any movement in the currency looks to be connected to the current economic downturn in the Eurozone. But some analysts say the picture in Europe isn’t as bleak as it may seem.

“The biggest driver of [the pound] is likely to be proof that the European situation is not careening out of control. Barring a major shock, I don’t think the global economy will fall apart on account of what’s happening in Europe. That bodes well for the prospects of the pound,” says Andrew Wilkinson, senior analyst at Interactive Brokers. He expects the pound to move to $1.50-$1.55 by mid-July.

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“The economic situation in Britain is bad, but it’s not deteriorating; it’s probably getting a little bit better,” says Joseph Trevisani, chief market analyst, FX Solutions. However, he doesn’t think the pound will move much, expecting it to stay between $1.43 and $1.46 through mid-July. “We’re in for a very long period of slow growth. The only caveat is the European banking system. If that has serious problems, that’s going to pull everybody down, including [the pound],” he says.

Ken Lazzara, FX analyst at TradeMaven Group, says the pound could see a bit of recovery by mid-July, trading around $1.47-$1.48.

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