Sterling Strongest Currency Tip for 2011

Barcap, the securities trading arm of Barclays Bank, has tipped the UK currency to to be the world's strongest in 2011. The pound has fallen 20% since the Banking crisis began in September 2008. Specific forecast rates of $1.82 and euro 1.28 is given for the end of 2011. Sterling closed at $1.58 today. This implies a rise of 15% against the Dollar and 7% against the Euro. Barclays is also bullish about the UK stockmarket, forecasting a rise of 18% in the FTSE.

Sterling too high

I read on Telegraph.co.uk that Sterling has reached $2.05. How amazing!!! Great value for the UK consumer. But the problem is, it's an unsustainable level. By no stretch of the imagination is Sterling worth anything like $2. The purchasing power parity suggests something more like $1.30 - taxes included.

My advice is to enjoy it while it lasts. The Dollar is weak. The pound isn't strong. And eventually the markets will correct the valuation.