Great Graphic: A Notable Decoupling

This Great Graphic was created on Bloomberg. The bar chart is sterling's performance against the dollar over the past six months. The line is the euro.  

One can readily see how well they tracked one another until mid-January.  The euro has traded sideways to higher, while sterling has been, well, pounded.

There are several factors that may have played a role in this notable decoupling.  There has been a continued re-weighting of international portfolios toward Europe.  The timing also corresponds to the passive tightening of the euro area financial conditions.   

On the UK's side, economic data has been poor to dismal and, although monetary policy is on hold, further easing of policy seems necessary especially as the government remains committed to fiscal austerity.  There has also been a shift in speculative sentiment.  As we noted,   the net speculative sterling position is now short for the first time since last September and by the most since last June.  
Great Graphic: A Notable Decoupling Great Graphic:  A Notable Decoupling Reviewed by Marc Chandler on February 18, 2013 Rating: 5
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