"The pound was particularly volatile yesterday as traders tried to decipher signals coming from the equity market regarding a potential bid from a U.S. private equity firm for the UK supermarket chain Sainsbury’s.

At times when U.S. firms are bidding for control of a UK entity, there is a mistaken belief that the buyer will need to buy a significant amount of Sterling to complete the purchase. The fact is that these deals, although valued in billions, are almost never cash transactions, and are never completed in a short time frame.

Therefore, any purchase of Sterling is unlikely to be a single transaction, or series of transactions, and even if they were, they would take place over such a long period as to have no effect on the value of Sterling.

The pound was particularly volatile yesterday as traders tried to decipher signals coming from the equity market regarding a potential bid from a U.S. private equity firm for the UK supermarket chain Sainsbury’s.

The next few months will see the pound to be driven by the market’s perception of the strength of the economic recovery from the Coronavirus Pandemic and the timetable for the Bank of England to begin to taper asset purchases.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.