I have Regained My Faith in Sterling - it will have its heydays back

Wow, Sterling has bnounced back rapidly after the knock it suffered when the UK statistics office revealed that the UK economy was still contracting in the third quarter. Well, it has bounced back against well against the Euro and the Turkish Lira, by over 1c and about 3kurus respectively. It has however dropped almost 2c further against the US Dollar.

The recent Sterling rally has restored my faith in the currency, faith that it will one day regain the Euro and US Dollar value it held in 2007 and before. This is because, at the moment nothing seems to be able to keep Sterling down.

Now, this would immediately sound like bad news to UK overseas property agents; who is going to buy a Eurozone or American property that they could get cheaper a few months down the line. However, this is only a problem for cash buyers; mortgage repayments will also be made cheaper by a strengthening Pound. Furthermore: anyone who waits for Sterling to go that high will miss out on the low prices, because prices will almost certainly have grown again by that time.

Yes, this is not a short term thing. It refers to the fact that I had lost faith in Sterling ever regaining such strength against the Euro or US Dollar. Now I can see, that, one day in the distant future it quite possibly will.

There is still a long way and a lot of data to go, but what I have seen in the last few days is that positive UK data has a much larger positive effect on Sterling that negative news does on the downside. So, when quantitative easing is stopped and UK interest rates are back at closer to normal levels, when unemployment is back into negative growth, and the economy is back into single digit growth, it is likely that Sterling's value against foreign currencies will also be back at normal levels.

Disagree, please leave your comments below.

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