Bank of England monetary policy has to continue with quantitative easing.
Fiscal deficits are high and do not look like they will decline.
G0rdon Brown is in trouble with voters. The government is not able to function normally.
Increase in equities has not been as strong as in the US and other countries.
So why is sterling gaining versus the USD and EUR? It seems like this may be a play on the financial sector. We do not see it in the index given the nationalization of financial institutions, but London is a financial center. If London is expected to grow, sterling will stabilize and rise. Countries risk has been classified through themes. We have the export driven currencies. We have the commodity currencies. We have the safe have currencies. Each is driven by expectation concerning the business cycle. Each has a factor beta. For sterling the factor beta is global finance. Since the global banking system, sterling has been on the rise relative to other currencies. Follow finance and follow GBP.
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