U.K. Buyers See Improvements In The Sterling

It was a one-way-street for Sterling in May. Continuing the trend of late April, from a low of $1.44, it motored ahead – sometimes steamed ahead – to finish the month at $1.60, the year’s highest close. Sterling’s gains amounted to 11% for the month and a staggering 18% from the lows we witnessed in December.  So, why the apparent change of heart? The Pound collapsed as the UK continued to decrease interest rates. Although the US was doing the same, the UK rates had further to fall and investors looked to the Dollar as a safe haven. This no longer rings true as the US currency is once again forced to rely on its own merits, rather than the failure or danger of others.
 
This brings us to the million-dollar-question: Buy dollars now? Or wait for them to become cheaper? Sterling’s recovery thus far has been, to a large extent, a function of its previous destruction. It was too expensive above $2.05 and too cheap at $1.35. The happy medium is somewhere in between… but where? Logic suggests it is somewhere above $1.70.
 Sure, if you do have Dollars to buy, it is possible you may be able get them more cheaply. However, Sterling is not immune to a potential collapse in this market, so use caution.