Pound May Need to Fall Further to Plug the Hole of UK’s International Debt
Sterling has to find a level where foreign investors believe the long-term return on UK assets is attractive again.
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Borrowing costs in the UK will ultimately determine how far sterling needs to fall to plug the country’s external deficit.
Bonds and sterling have sold off sharply in recent days (notwithstanding today’s relief rally), but it’s the market with the lower liquidity – gilts – that will be the main determinant of sterling’s performance.