Sterling: the start of the collapse?

Sterling hit the deck this week and it's hard to imagine it recovering any time soon. So are we seeing the beginning of its collapse?

You know you're in trouble when even Zimbabwe dollars rise against your currency, says David Wighton in The Times. Sterling was walloped across the board on Monday, collapsing by 3% against the greenback in a matter of hours. It finished the day at a ten-month low below $1.50 and also fell to a three-month low against the struggling euro. Why?

A run of weak macroeconomic data in the previous few days notably a slump in business investment in the fourth quarter had revived speculation that the Bank of England would restart its money-printing programme to prop up the economy. Meanwhile, strong US quarterly growth figures foreshadow higher rates in the US. Monday's purchase by Prudential of the Asian operations of AIG also involved the sale of lots of pounds for dollars. But the key problem was a weekend poll showing that the Tory lead had shrunk to two percentage points.

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