Buy the British Pound
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Transcript of Buy the British Pound
Buy the British Pound
It seems to be time to buy the British pound
as the Bank of England contemplates raising
interest rates.
This is because the economic recovery is
moving along in Britain.
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As noted in Investing.com, the British pound
is trading at five year highs against the
dollar.
The pound was trading close to its highest
level in almost five years against the dollar
on Wednesday, amid heightened
expectations for a U.K. interest rate hike in
the early part of next year.
GBP/USD pair is trading near 1.70. This is
the best that the pound sterling has done
against the greenback since the early fall of
2009.
Traders are looking at a support to
resistance range of 1.69 to 1.70.
This good news for the GBP comes after a
promising purchasing manager index as
evidence of a continuing recovery.
Further Evidence of British Recovery
According to Reuters, the British purchasing
manager’s index is up and surging output boosts manufacturing numbers:
Surging output and an influx of orders
helped British manufacturing activity grow
last month at a much faster rate than
expected, a survey showed on
Thursday, boding well for Britain's swift
economic recovery.
The Markit/CIPS UK Manufacturing
Purchasing Managers' Index (PMI) rose in
April to 57.3, its highest reading since
November, compared a March reading of
55.8 that was revised up from 55.3.
As we have often noted on these pages, a
major factor in the value of a currency is the
strength of the nation’s economy.
As increased factory orders lead to higher
production the GBP is likely to go up as well.
The intermediate factor here is that the Bank
of England is likely to raise interest rates
within a year which has a direct bearing on
the value of the British pound versus other
currencies.
Trading the GBP
If you are going to buy the British pound you
need to buy it with something.
The handiest currency to use in this regard
is the US dollar, the USD.
something. The handiest currency to use in
this regard is the US dollar, the USD.
However, if you want to make a profit you
need to think of a currency that is likely to
suffer in the coming year and buy the British
pound with that.
The XE web site is a good source of
information about British pound rates:
The British Pound is the currency of United
Kingdom. Our currency rankings show that
the most popular United Kingdom Pound
exchange rate is the EUR to GBP rate. The
currency code for Pounds is GBP, and the
currency symbol is £.
Although the most popular quoted rate may
be the EUR/EURO that may not be the most
profitable pair to trade as the Euro zone as a
whole is getting better as well and one can
expect the Euro to do reasonably well in the
coming year.
About a year ago we wrote about trading
BRICS currencies.
The BRICS nations are
Brazil, Russia, India, China and South
Africa.
These nations were leading the charge out
of a global recession but their economies
have cooled off.
Russia is especially having problems after
annexing part of a neighboring country and
China has still not convinced folks that its
real estate bubble will not rapidly burst.
Any of these currencies may be a better bet
for profits than the USD or EUR if you want
to buy GBP.
That assumes, of course that you plow your
profits back into one of these currencies and
that their economies subsequently recover.
As always do your own homework and sit
out any trades that you do not fully
understand.