It sounds very positive in theory, but the application is a lot trickier. I looked at the exact two currencies and found correlation, but Sterling on the shorter term seems a lot more volatile and retraces quite deep on initial moves. I suggest studying the characteristics of the two and do a thorough test before adopting such a view.For more information take a look at www.forextraderengland.com

Being a currency trader I always look at the majors in my Analysis and see close correlation with a lot of these currencies, especially the Euro and Sterling. I am trying to figure out some sort of hedge strategy to apply on these two currencies, but that is obviously easier said than done. Any suggestions ?

From an Elliott Wave perspective, they are almost identical in counts.
I believe they will track to each other pretty closly going forward as well.

I think you`d end up flat at best trying to hedge one on the other.
You need to understand where they are going longer term and what they do in the medium to short term to get there.

I think I know pretty well.

Basically everthing against the buck is doing the same thing, but at different degrees of trend.
Some interesting moves are ahead of us indeed.
Big moves.

Good luck-

Yes they are in correlation, as well as the franc.

I would assume you mean you`d like to go short one and long the other.

Only way is with 2 accounts.
Unlike options trading, you can`t straddle.
Or you could go to REFCO and trade SPOT.