US Edition 
Pound forecast to tumble on 'insane' spending cuts
Britain's spending cuts have been branded as "absolutely insane" by one of the world's leading currency traders, who expects the pound to tumble beyond the low it has set this year.
"I think what Britain is doing is absolutely insane" John Taylor, the founder of the $8bn FXConcepts fund, told The Sunday Telegraph. "The Conservatives will lose their stomach for this."
Reducing Britain's £156bn budget deficit is the cornerstone of the government's plan for restoring the economy's health. George Osborne, the Chancellor of the Exchequer, told Parliament last week that the £81bn in spending cuts would pull "Britain back from the brink."
Although Mr Osborne's plan has won support from many economists, there remains concern that it will damage a recovery that is already showing signs of faltering.
"The last retail sales numbers were pretty ugly and then we have to go through the VAT hit," said Mr Taylor, who at 67 is one of the oldest operators in the foreign-exchange markets. The pound will fall below 1.40, possibly this year, he expects. Sterling reached 1.43, its weakest against the dollar this year in May.
The Bank of England has publicly welcomed sterling's decline since the financial crisis erupted in 2008, but the central bank is not alone. Having already yanked hard on monetary and fiscal levers, an increasing number of governments are eyeing a weaker currency as a way of securing their share of an uneven global recovery.
Like many who trade currencies, Mr Taylor says that the US is keen to see the greenback fall further despite its official commitment to a strong dollar. That policy, which may be accomplished by a new round of quantitative easing - or printing money - next month, is like "throwing a rock into the glass window of the international monetary system," said Mr Taylor, who founded FXConcepts in New York in 1981.
The dollar's decline over the past three months has already prompted the Japanese, the Israelis and the South Koreans to intervene in an effort to prop up the greenback, and currency policy is likely to be high on the agenda when leaders of the G20 countries meet in South Korea next month.
However, Mr Taylor is sceptical that the dollar's decline against the euro can be sustained. "The euro at 1.40 for six months will put Europe back in recession. I can't believe the European authorities are being as stupid as this."
Despite the headaches for policymakers, the increasing focus on currencies is creating opportunites for those who trade them. "Currency markets follow the trend right to the edge of the cliff and hopefully not over it," explained Mr Taylor.