Economics Q8 Suppose, on a certain day in February, a speculator observes the following prices in the foreign exchange and currency futures markets:   GBP/USD spot: 1.6465   March futures: 1.6425   September futures: 1.6250   December futures: 1.6130   The speculator thinks that the markets are overestimating the weakness of sterling (GBP) against the dollar. How can she act on this view to make a profit? Under what circumstances do her actions lead to a loss?

ENGR.ECONOMIC ANALYSIS
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Economics

Q8 Suppose, on a certain day in February, a speculator observes the following prices in the foreign exchange and currency futures markets:

 

GBP/USD spot: 1.6465

 

March futures: 1.6425

 

September futures: 1.6250

 

December futures: 1.6130

 

The speculator thinks that the markets are overestimating the weakness of sterling (GBP) against the dollar. How can she act on this view to make a profit? Under what circumstances do her actions lead to a loss?

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