The Sterling is in free fall in February 2010 against its major rivals.

[RTFX-Trading]

The Sterling is in free fall in February 2010 against its major rivals.

The British Pound is in free fall against all of its major rivals in the month of February. The Sterling has been suffering following a series of negative data concerning the UK’s economy published during the month. The largest drop registered during the month was on the 10th of February, following the publication of the Bank of England’s growth forecast and inflation.

The publication did not give much hope to see the Central Bank raising its rates by a quarter of a point to 0.75% before the fourth quarter. The markets were expecting the BoE to raise its rates to 1% by the end of the year. These estimates added further pressure to the Pound. Certainly, the US Federal Reserve’s decision to raise its discount rate by 25 basis points yesterday did nothing to help the Sterling, as it was one of the currencies that suffered the most after the announcement. The Fed’s intervention sparked a wave of purchases of the US Dollar and selling of other majors including the Pound. Also weighing on the Sterling earlier today was the Central Bank of Australia’s (RBA) declaration that its current rates are 50 to 100 basis points below normal, prompting the GBP/AUD pair to test its low, on the important technical support around 1.7240.

The Cable has fallen by 3.80% so far this month, reaching a low of 1.5348 earlier today. Against the Australian Dollar, the Sterling reached a new low at 1.7218 bringing the total loss for the month to 4.43%. The biggest winner against the Sterling is however the Canadian Dollar in the month of February, with the Pound losing 5.38%, while against the Yen it is down 2%.

This fall has so far been predicted by our TraderTip for most of the pairs concerning the British Pound.

[IMG]http://www.rtfx.com/images/news/GBPTradertip.gif[/IMG]

The percentage monthly loss suffered by the Sterling this month is illustrated in the graph below:

[IMG]http://www.rtfx.com/images/news/GBPMonth0210.gif[/IMG]

The question remains: Will this negative trend for the British Pound continue in the longer term. The answer to this question will perhaps be given to us by the RTFX-TraderTip in the following months.

Emman Xuereb
Trading Desk
RTFX Ltd
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