Profit from the Coming Devaluation of the British Pound
On Friday we talked about how successful investors can align their interests with politicians for maximum gains and profit.
Right now there appears to be another opportunity to just that. In this case, it’s by betting on a devaluation of the British pound. England’s central banker seems more than willing to accommodate - maybe even embracing - the devaluation of the pound.
Bloomberg reports Pound Slides on Speculation Bank of England Favors Declines to Buoy Economy:
The pound fell to its lowest level in almost six months against the euro on speculation the Bank of England favors a weaker currency to help revive the economy.
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There’s “growing concern over the financial position of the U.K.,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. “Added to the negative pound sentiment this week were the comments from King that the bank favors the weaker pound as a means to rebalance the economy.”
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The Bank of England’s nine-member Monetary Policy Committee was unanimous in leaving the its asset-purchase program at 175 billion pounds ($279 billion) at its Sept. 10 meeting, the minutes showed on Sept. 23. King had pushed at the August meeting for an increase to 200 billion pounds but was outvoted.
The central bank began the so-called quantitative-easing policy in March in an effort to lower borrowing costs as the U.K. grappled with its worst recession since World War II.
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“A currency which the country’s own central bank likes to see weak obviously is not an attractive investment,” analysts including Lutz Karpowitz at Commerzbank AG in Frankfurt wrote in a research note. “If King keeps digging then he is clearly signaling that he does not care about this loss of trust.”
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“The Bank of England appears unconcerned by the currency weakness at this stage,” analysts including Ian Stannard in London wrote in a report yesterday. “We maintain our bearish sterling view, expecting the currency to be the weakest among the majors.”
Bearishness is high and we could be on the verge of another “breaking of the Bank of England.”
The best part is, our interests will actually be aligned right along with the politicians. The United Kingdom’s elected officials actually want to devalue the pound.
England’s central banker is on board. Here’s where Governor of the Bank of England is actually talking down the pound:
Mervyn King, the Governor of the Bank of England, appeared to back a weak UK currency and reiterated concerns about the prospects of Britain’s recovery.
Speaking to The Journal, the Newcastle newspaper, Mr. King said that the significant decline in the value of sterling in recent months “will be helpful” in rebalancing Britain’s economy by helping to boost exports.
This is shaping up to be big. And readers of our investment newsletters will be well-positioned in the days ahead.
