The long-term picture

After having fallen to less than 1.4000 against the USD in September 2000, the Pound made another dive to 1.3678 in June 2001.

The support zone around 1.40, however, proved to be an impenetrable floor from which a reverse "Head-and- Shoulder"-pattern developed. The neckline of this reversal was completed in July of last year with the break-out, followed by a strong surge towards the 1.60 level.

Strong movements need to be consolidated and excesses will be corrected. These corrections at times are very weighty as is shown when Sterling gave up 6.7% from the high reached in January of this year.

Sterling nevertheless remains in an up-trend against the USD and we expect this trend to remain so.

The Bank of England may well intervene in the market to slow down the appreciation of Sterling but market forces will speak the final verdict as usual.

The medium-term picture

During January of this year, Sterling-bulls became increasingly greedy and pushed the GBPUSD exchange rate to 1.6571 on January 31.

At this stage, the bears got into the driver's seat and put an end to the GBP-rally.

Fear crept into the hearts of the bulls and when the sentiment of fear finally became unbearable (they could not stand the bears any longer!), the exchange rate had fallen back to the level of 1.55.

The stage was now set for a new rally. We are back in the up-trend, which we expect to continue.

The short-term picture

Short-term, we can make out an up-trend that started at the beginning of April and does not show many signs of exaggeration yet.

Within the favourable long- and medium-term trend, the stage is set for a gradual appreciation of the GBP against the USD which may be slowed from time to time by interventions by the Bank of England which does not like a Pound that is too strong as it would make British goods so much more expensive abroad.

Currency Trading

If you are interested in currency trading, please consult our Presentation at www.pzim.com or email to forex@pzim.com.

The following recommendations were valid at the time of writing, viz. at

and may no longer be relevant at the time of reading.

Peter Zihlmann
May 16, 2003

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