The British pound could fall further and reach parity with the US dollar, according to hedge fund manager Crispin Odey. “I don’t think you can start getting bullish on sterling,” the founder of Odey Asset Management told the Financial Times. His firm’s flagship European hedge fund is up about 145%, mostly after shorting government bonds like British gilts. Loading Something is loading.
The British pound could fall further and reach parity with the US dollar after hitting records lows, according to hedge fund manager Crispin Odey.
On Monday, the pound sterling hit an all-time low against the dollar of $1.035 but recovered somewhat to reach $1.067 on Tuesday. Still, it is down from $1.40 in June 2021.
“I don’t think you can start getting bullish on sterling,” the founder of Odey Asset Management told the Financial Times, adding that “it’s so close” to parity.
Odey’s flagship European hedge fund is up about 145%, according to the FT, mostly after shorting government bonds like British gilts.
He also told the FT that short positions on the pound have also been helpful, while bets against British bonds are “the gifts that keep on giving.” But Odey added that Britain’s currency and bonds were getting less attractive to short.
Other firms have also profited from shorting the pound sterling. Transtrend, which is based in Rotterdam, has gained 30% this year from bets against both the pound and fixed income instruments, the FT said.
British debt, along with the pound, tanked after the UK’s new chancellor detailed a slew of prospective tax cuts and hinted more were coming. Investors feared the cuts would not only increase government debt but also fuel inflation, spurring the Bank of England to hike interest rates more aggressively and potentially drag the UK economy into a deep recession.
The yield on Britain’s five-year bonds soared more than 51 basis points on Monday to 4.579%, overtaking the likes of Greece and Italy. Yields on five-year Greek and Italian bonds were 3.978% and 4.079%, respectively.
That indicates markets see more risk in the UK’s medium-term gilt than in equivalent bonds for the most heavily indebted eurozone countries.
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