How to profit from the Eurozone breakup
What May Happen In The UK? The disruption of the Eurozone, or at least of part of it, has important potential effects on the British economy. The pound has been acting as a safe heaven in recent months, in stark contrast to the severe depreciation of recent years. Investors and citizens of troubled countries are looking for places to put their money and the pound is presently near the top of their list of choices. The coalition government welcomes this influx of capital (if not the BoE) as it provides them the ability to raise debt at a very low cost. A 10-year Gilt is currently yielding just 1.55%, near generational record-lows and, if trouble continues to mount in the Eurozone, this yield is expected to decrease potentially even more.
Spread bettors may defensively add some Gilts to their portfolios and benefit from such a situation. Shorting the EUR/GBP cross is also a valid option as the extra demand for pounds may continue to push up the price of the Pound relative to Europe. The pair is quickly approaching the low observed on October 2008 at 0.7691 and if a breakup of the Eurozone does materialise the range trading observed during 2005 and 2007 between 0.65 and 0.71 could very easily be reached again.
Euro / GBP weekly chart
July 2012 | www.financial-spread-betting.com | 67