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Are we at the start of a run on the pound?

The news that many holidaymakers and overseas property owners in the UK are "panic buying" Euros is starting to concern many investors in the currency markets. It seems that last week's comments from Bank of England, in which Mervyn King suggested that the UK economy was not recovering as quickly as others and the currency may be overvalued in the short term, has injected a significant amount of concern into the markets. So are we potentially at the beginning of a run on the pound?

While at this moment in time there is obvious concern about the UK exchange rate, specifically against the euro and the dollar, the movements have not been sufficient to justify calls of a "run" on the pound. However, while the initial falls have been recovered slightly, many investors do believe that the UK currency will encounter yet more weakness in the short to medium term until associations such as the Bank of England become more positive and at least give the impression they want to protect the pound.

Until we see a concerted effort to protect the value of the UK currency against leading overseas currencies, many speculators may well attempt to make "hay while the sun shines" and cause disruption in the currency markets.

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