Cable – getting nervous about $2?

The move to watch for the break beyond 2.00 is back through 1.95, then we can look for 2.06 as a first breathing point with 2.00 forming a base area for the move towards 2.12/13.

Despite the fact that sterling is the currency that traders love to hate, there are a number of fundamental reasons to remain or become more bullish. The interest rate differentials are attractive, the UK benefits from macro stability and the current account deficit is, comparatively speaking, something to play down at 2% of GDP.

The US current account deficit is now reaching the limits of sustainability. At 6% of GDP, the deficit is adding to the US’s stock of net overseas debt (now more than 20% of GDP). Short of a rapid shift in US economic policy, this all makes for a strong argument to buy Cable dips, add through 1.95 and hold your breath as we move through that $2.00 level.