Trading Idea: British Pound Sterling (FXB)

Newly minted Prime Minister David Cameron’s new coalition government has made a big splash in the U.K. Announcements of massive cuts in government spending have taken even hard-nosed skeptics like hedge fund manager and London Junto guest Hugh Hendry by surprise. Turns out that the market appreciates fiscal austerity measures a lot more than Britain overpaid  schoolteachers – like the one who took home 283K GBP ($450K) last year. Pretty much since the day the Cameron government took office, the British pound sterling (FXB) has headed in one direction- and that’s straight up. Now, granted, this happened to coincide with a relief rally experienced by the Euro. And  economic  growth in the U.K. economy has been better than expected. But it doesn’t take a lot of imagination to realize that free markets appreciate Hayekian fiscal austerity a lot more than Keynesian stimulus. With the British pound sterling penetrating its long-term 200 day moving average in the past few days, trend following currency traders are already surely on the train.

.Chart forCurrencyShares British Pound Sterling Tr (FXB)

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