Europe Economy

Charts: Sterling is the New Carry-Trade Currency

The British pound should be the new carry-trade currency of choice because UK interest rates will be held at record lows for longer than their European and US counterparts, Chris Zwermann from global strategist at Zwermann Financial, told CNBC Wednesday. 

Charts: Sterling the New Carry-Trade Currency

"At the moment I think the market already looks for a new currency as a carry currency and I must say sterling is my favorite at the moment," Zwermann said.

"I think the Bank of England will be one of the last central banks, between the big three, to hike rates and that might give even more reasons to sell sterling or to finance in sterling," he said.

Investors choosing a carry-trade currency will look for low interest rates so they can convert funds into a currency whose country has a higher interest rate in order to buy bonds and pocket the yield. Sharp moves in the currency crosses can make the practice risky, however.  

Zwermann thinks sterling could fall to £1.05 against the euro . Watch the video above to see he's expectations for the euro versus the dollar.

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