At the time that note was published, the U.K./U.S. interest rate differential implied GBP/USD should have been below 1.54, well below current levels. Said another way, sterling has gotten progressively more richly valued against the greenback, arguably, without sound fundamental reason to explain the wide gap between the two currencies.
There are more sector catalysts that increase the allure of DBUK and DXPS, if the pound declines. DBUK has a weight of 22.7% to financial services stocks while DXPS devotes 16.7% to that sector, an important factor when considering that financials are expected to be key drivers of British dividend growth this year. British firms accounted for 11% of global dividends in 2013. [The Case for U.K. Dividends]
DXPS merits closer consideration for another reason: Its largest individual holding is AstraZeneca (NYSE: AZN). The British pharmaceuticals giant is currently the apple of Pfizer’s (NYSE: PFE) and if a deal is reached, it could be worth $100 billion or more. Astra is 6.8% of DXPS’ weight. [These ETFs Could Benefit From an AstraZeneca Takeover]
DXPS Top-10 Holdings
Table Courtesy: WisdomTree