Currency investors benefit from slide in sterling

With the pound suffering its worst fall against the dollar since 1971 last week, currency investors took advantage by trading heavily in GBP/USD: Barclays Stockbrokers saw 70 per cent of all trades in this currency pair over the 11 days that the pound was falling. FX trading allows investors to "short the market" and speculate that a currency will continue to fall versus another currency and therefore gain returns from trading in the right direction. While GBP/USD is the most popular currency pair, Barclays Stockbrokers has seen demand for FX trading surge as investors capitalise on this opportunity.

Henk Potts, Equity Strategist, Barclays Stockbrokers said: "Whilst commodity prices have been the main driver of FX movements in the last few days, fundamentals have also been at play. A stream of gloomy economic reports weighed heavily on the pound, and heightened expectations of an early rate cut in the UK following the publication of the Bank of England's inflation report, which spurred further declines in sterling.

"Although we had expected some weakness in both the euro and sterling against the dollar, we had anticipated this to be more pronounced later in the year, and this correction has been fairly swift. We may see some consolidation around or slightly above current levels, given the size of the moves, although clearly the commodity markets will remain a key driver."