The British pound has shown strength over the past few weeks, reaching a 22-month high against the euro. Investors may see the pound as a safe haven currency as the U.S. dollar weakens and Spain dips into a recession.
“The main reason the British Pound is set to continue to appreciate has to do with the increasingly dovish monetary policies being implemented or threatened by many of the world’s major central banks simultaneously. Whereas the Bank of England has started to lean hawkish: Chairman Ben Bernanke of the Federal Reserve, despite boosted forecasts, talked down the economy, battering the US Dollar,” Christopher Vecchio, Currency Analyst, wrote on Daily FX.
The pound gained 1.4% against the U.S. dollar and 2.1% against the euro. This happened despite the United Kingdom officially slipping into a double-dip recession. Analysts are certain the currency has benefited from the rising turmoil in the Eurozone and the fact that the pound is not the euro, reports Deborah Levine for MarketWatch. [Spain ETF Falls on Recession, Downgrades]
Meanwhile, pound sterling exchanged at 1.23 euros as the UK was seen as a “safe haven” after figures confirmed Spain was back in recession and 16 Spanish banks had their credit ratings downgraded. The U.K. is currently viewed as a “safe haven” because it is one of the largest developed economies to have held onto its AAA credit rating, reports Forex News on FXEmpire. [British Pound Falls After UK Inflation Data, Retail Sales]
CurrencyShares British Pound Sterling Trust (NYSEArca: FXB) has gained about 2% over the past 10 days. It reflects the price movements of the British pound against the U.S. dollar. FXB has about $104 million in assets under management. [ETF Spotlight: FXB]
CurrencyShares British Pound Sterling Trust
Tisha Guerrero contributed to this article.
Read the disclaimer; Tom Lydon is a board member of the funds for Guggenheim Investments.