NEW YORK ( TheStreet) -- Sterling is a sell in 2015.
Big news came for FX traders in last week's Autumn Statement from U.K. finance minister, George Osborne. Because the U.K. treasury has done so little to reduce its deficit, the Bank of England's (BOE) long-awaited hike to interest rates won't come until late next year, if at all. Rates are now at an all-time low of 0.5%.
The bank will delay until after the general election in May to avoid seeming partisan. Easy credit underpins BOE head Chancellor George Osborne's plan, both for keeping state borrowing costs low and for enabling consumer debt to reach and beat its 2008 peak by 2018 as per his forecasts. But such loose money risks worsening the U.K.'s current account deficit with the rest of the world, already at new record levels. All of these factors add up to a weakening of the historically strong U.K. currency. Here are five reasons why this is going to happen in 2015:
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1. Tax receipts are badly lagging forecasts and the U.K. not on a solid path to fiscal responsibility.
This is thanks primarily to this year's 2.8% rise in GDP coming from part-time and low-wage jobs, which raise little income tax. Those jobs also pay so badly, the workers get income support from the state. So the U.K.'s deficit for fiscal year 2015 will be 6% larger than forecast.
Chancellor Osborne's boast about repaying a World War I loan as a sign of the government's "fiscal credibility" is just a misleading distraction. The last £1.9 billion ($2.97 billion) will finally be retired next March, saving a meager £15 million per year in interest payments. But with this fiscal year's tax receipts undershooting the Government's own forecasts from 2010 -- when it gained power by vowing to slash national debt -- by more than three full percentage points of GDP, the principle is still needed to fund current spending. So it will be refinanced at today's super-low interest rates.
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