Sterling Peps Up At The Start Of 2011

By Adam Jordan

"So far, so good" must be sterling's mantra as it approaches the middle of January. So far this year it has eked out an additional four cents against the euro, the only major currency it was able to outperform in 2010, and to achieve proportionally similar gains elsewhere. It is off its all-time lows against the Australian dollar and the Swiss franc and looks ready for action. 

It will need to be. There is minimal chance of the pound having an easy ride through 2011. If the euro encounters renewed stormy weather, investors will vacillate between punishing the pound for its links to Euroland and rewarding it for its separation. Their attitude will reverse every couple of weeks. That will go on at least until there are clearer signs from Brussels about the extent to which it is prepared to subsidise its weaker brethren.

The dollar's fortune is no easier to read. Is it a safe haven that will protect their hard-earned?  Or is Washington doing its best to devalue America's way out of what is by far the biggest national debt in the galaxy? That is what seems to be happening at the moment and the dollar could become cheaper as the year progresses.

Adam Jordan is a currency specialist at foreign exchange provider Moneycorp.