Pound Slides as Traders Consider Current Rally Excessive

The pound sterling dropped versus the euro and the dollar, after hitting a seven-month high against the dollar in a sharp rally to be considered excessive, as traders agree it does not reflect the United Kingdom’s economic outlook.

The British pound also lost ground against the yen and the country’s main stock exchange index, the FTSE 100, dropped 1 percent after two days of significant gains. The benchmark measure of U.K. equities interrupted its climb to a five-month high after Barclays Plc lost 13 percent, as investors from the United Arab Emirates sold their shares in worth of 4.1 billion pounds.

Even if the pound has reached very low levels in the beginning of the year compared to much higher values it had before the global slump, Britain’s economy has still not showed sufficient signs of recovery that could sustain the pound’s rally for much longer.
the forex trading online news .Analysts consider the current uptrend weighing on the pound to be related directly to the extreme low levels it hit in the previous months, but as it may not be in a sustainable recovery path, it is expected that traders make profits after 2 days of sharp gains versus the dollar, as occurred during the past week. Without further optimistic reports confirming that the U.K. may soon be out of the current recession, the pound is not expected to climb further against currencies like the euro and the dollar.

GBP/USD traded at 1.6407 from yesterday’s top at 1.6495. EUR/GBP rose to 0.8650 from a previous price of 0.8615.

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Swedish Krona at Six-Week Low as Concerns Rise in Latvia

The Swedish currency hit a six-week low level after speculations rose that Latvia will devalue its currency, as an attempt to save the country from a deep recession, consequently affecting negatively loans held by Swedish banks in the Baltic Nation.

According to a note posted this week by Riksbank, an economic deterioration in the Baltic countries is an imminent risk to Swedish banking institutions, since Latvia’s financial system is highly linked and dependent on the Scandinavian nation’s funding. Mareks Seglins, the Latvian Justice Minister affirmed that the country’s currency should end the system that maintains it pegged to the euro, and this declaration impacted directly the Swedish krona, causing it to fall more than 4 percent against the euro since June 1. Since Latvia’s independence, Sweden is the main fund provider in the private loan market for the Baltic nations.

The risk of devaluation for the Latvian lat is considered high, according to analysts, even if they expect that a cooperation between the Eurozone and Sweden to maintain the lat pegged to the euro, the pressure is significant and rising. ING Groep NV affirmed that there is a 50 percent chance that the Latvian currency will be devalued during the next 12 months, which could ease the ongoing recession in Latvia, but cause an important impact on the Swedish banking sector and its currency.

USD/SEK traded at 7.6256 from a previous rate of 7.7160. EUR/SEK also fell from 10.9060 to 10.8500.

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