Forex Flash: Will structural deficiencies in the UK damage the pound? – UBS

Very weak industrial production numbers on Tuesday have prompted further exasperation for sterling. With growth conditions everywhere else stabilizing, the UK seems the odd one out: defying cyclical tailwinds surely means the structural deficiencies in the economy are now becoming dominant.

“Coupled with the news that incoming BoE Governor Carney is talking to Treasury officials about the remit, likely to discuss 'kitchen-sinking' options, markets may now converge around the view that sterling is going to be permanently damaged.” notes Research Analyst Gareth Berry at UBS. It's not as if the world's oldest currency that is still in use will be consigned to history as the UK thinks about joining the euro. As investors continue to sit on short positions (and rightly so), perhaps it's time to explore some of the factors, which may start to turn things around.