Seven Reasons to Sell Sterling

- "Over the summer the pound has bounced against the dollar. But we believe the risks are to the downside for our end year 1.35 forecast."
- "There are seven reasons to sell sterling. First, the rest of the BOE Monetary Policy Committee is unlikely to join Andrew Sentance in voting for rate hikes. Second, the beneficial impact of last month’s Budget has now been priced into sterling. Third, the scale of the budget cuts forecast for the next four years will undermine growth. Fourth, exports can’t be relied upon to take up the slack. Fifth, the MPC remains willing to resume quantitative easing if the economy weakens. Sixth, tighter fiscal policy and looser monetary policy can result in a much weaker pound as occurred after the 1981 austerity budget. Seventh, other major currencies like the yen have also experienced prolonged weakness when fiscal policy has been tightened during times of economic weakness."
UBS Foreign Exchange Note 20100712