Can the British Pound Fall below 1.52?
If we look at the weekly chart we can see that the British pound has been on very wild rides versus the us dollar expecially in 2008 and 2009. The pound rose above 2.01 in late 2008 and then took a dive down to 1.35 by early 2009. The pound rose again but ranged in a tamer and more controlled manner in 2009. For the past 2 years however the pound has had a very controlled range roughly between 1.52 (low) and 1.67 (high). The pound has looked resolutely supported above 1.52 for the past 2 years.
In 2009, the British government began to cautiously apply QE measures and maintained low interest rates in order to better control inflation and keep it at a manageable level. Another effect of QE measures however is that it does depreciate a country's exchange rates versus other currencies. Thus this would largely account for the GBP not reaching such extreme highs as it did back in 2008. Such a measure would undoubtedly stimulate the country's exports and ultimately help ine the economic recovery of the country in general.Conversely however it does make imported goods more expensive.
Overall however it seems to have stabilized the currency and has kept it within a range that looks to be acceptable for the long range plans for the british economy. The pound has not experienced such extreme highs and lows as it did back in 2008 and early 2009.
It also seems to have established some kind of floor or low below which the pound has not been seen to fall. This floor also serve as a gauge to how the eurozone economy is in general.As long as it holds up perhaps it can signify that the setting for the future economic recovery of the eurozone is in place. I believe that we should keep a careful watch at where the pound goes in the coming months. Any fall below 1.52 for the GBP would indicate a shift in the efficiency of QE measures and as such would see the pound anf the euro suffer serious losses versus the US dollar.
Of course other measures could be adopted to shore up the pound but a drop below 1.52 us would shift the market's perception of the currency and could bring some chaos to the trading of this currency for a certain period of time.