Archived IMT (2008.11.12)

Sterling breaks below $1.52 for the first time since 2002 and hits new record lows against the euro at 82.36 pence as the Bank of England forecasts deepening economic contraction and inflation falling well below the 2% target, which would be the first time since 2005. The currency damage was exasperated by reports showing unemployment hitting a 16-year high and average earnings growth at the weakest in 5 years. If buying the yen was seen as the path of least resistance, then selling the pound has been the more popular trade, as the currency drops 38%, 13% and 24% against the yen, US dollar and euro respectively. Having broken below our $1.5250 target, we could ow now expect $1.48 as the BoE is seen easing by another 75-bps as early as next month.