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’Why sterling just got splattered
Impressive move following the Bank of England rebooting QE…
Some immediate reaction from Alan Ruskin of Deutsche Bank:
A few things stand-out immediately on BOE QE decision to do extra 75bn, which was more than the market expected,
Don’t blame us for the Great British Krona
Please, please, please don’t accuse the Bank of England of getting involved in currency wars.
It hasn’t deliberately deflated the Great British Krona Sterling in the past couple of years. In fact, monetary policy has has nothing,
BoE MPC minutes – market reaction and comment
The Great British Krona has taken a knock following the publication of the September MPC minutes.
For context, that’s an 8-month low against the dollar.
And so to the comment.
Nomura’s economics team focus on the difficult PR task that faces the Bank:
A sterling safe haven
Here’s a safe haven idea you may not have thought of.
The Great British Krona.
Standard Bank’s Steven Barrow points out that sterling has fallen, on a trade-weighted basis, much more than the other major currencies:
Selling Italy, buying UK [updated]
Compare….
Contrast…
That’s a modern record low for the 10-year gilt yield and a record eurozone high for its Italian peer. Outwardly, it’s an amazing gulf in some respects as both sovereigns are doomed to low growth.
Sterling vs gilts
Compare and contrast.
The yield on the UK 10-year gilt falls below 3 per cent for the first time since November on Tuesday morning…
… while cable falls to its lowest level since January.
Are we to assume nervous UK-based investors are buying gilts,
For the love of Ronia (and repo)
It confusingly shares a name with a Staines minicab operator…
And a Swedish children’s book…
But this Ronia (short for Repurchase Overnight Index Average) is going to be very special in its own right. It’s a brand new repo-based rate for the UK interbank market,
GBP, GDP and HSBC
Stagflation or not, sterling has responded positively to Wednesday’s GDP release.
From Reuters:
It looks like some punters were expecting a weaker reading and have been caught short. That and the fact that the dollar has fallen sharply against several major currencies (not just sterling) ahead of the FOMC decision and subsequent press conference.
Assessing the dollar’s weakness
How weak is the dollar?
A timely question asked by Goldman Sachs on Tuesday morning, what with the euro reaching a 15-month high of $1.45 earlier today. Indeed, on the face of it, there is weakness everywhere.
Cable unwinds
The post budget sell-off continues, leaving cable close to an important support level at $1.5980.
Next stop $1.5750, according to chart watchers.
But does the weakness reflect worries that the
Miserable like it’s 1994, in Britain
It’s Friday, so we shouldn’t be doing this but … it’s misery (index) time!
Société Générale has an update of the infamous index, which was first developed in the 1970s by American economist Arthur Okun.
Selling England by the pound…
… is the title of the 1973 album from ‘prog rockers’ Genesis, and it also sums up the UK’s inflation problem, according to Bank of England hawk, Andrew Sentance.
In a speech at the Institute of Economic Affairs ‘State of the Economy’ conference on Thursday,
Ugly UK GDP figures
Fresh off the wires — a suggestive double-dip GDP figure for the UK:
Blaming the weather. How very British.
The FX market is now through the looking glass
It seems ingrained in the FX market that rate rises are currency positive, but this has not always been the case. In an environment where inflation is problematic the market asks the question – is the central bank ahead or behind the curve?
Those are the opening thoughts of HSBC’s in-house FX guru David Bloom and team on Monday.
Old Lady conspiracy theories
It’s sometimes said that conspiracy theories are really a back-handed compliment to belief in the power of government. Because they can’t possibly be that incompetent, can they?
And so we turn to the Bank of England’s 2 per cent inflation target.
Back to earth – the UK GDP rocket
Remember that forecast-busting UK GDP reading? You know, the one boosted by a particularly strong performance from the construction sector.
Well, Tuesday’s purchasing managers survey puts it into context.
A record GBPEUR 2-yr swap spread
This is a chart from Lloyds TSB showing the EUR/GBP exchange rate, versus the two-year EUR/GBP currency swap spread:
According to Adrian Schmidt, the bank’s newly appointed senior currency strategist,
Something for Mr Posen and his friends
Here’s something for Adam Posen and all those in favour of further quantitative easing to chew on; UK retail sales have fallen for a second month in a row according to the Office of National Statistics:
Dollar meltdown
This is getting a bit much, isn’t it?
The dollar suddenly lurched down across the board on Thursday.
First, cable flying past $1.60 (all charts via Reuters):
While the euro settled down to life after $1.40:
25 interventions in a one week band
Ben Davies, CEO of gold hedge fund Hinde Capital, made an interesting point on the subject of currency intervention in a recent letter to investors, as picked up by the King World News blog.
He alludes to the writing of Henry Hazlitt,
Charts du jour – FX edition
Parity for the Swiss franc:
Meanwhile, the US dollar has fallen to a 15-year low against the Yen:
And sterling has picked up in the wake of Tuesday’s stronger than expected inflation data:
A Dutch machine with a fat finger
A possible culprit has been found for Wednesday’s sharp movement in cable — which saw the GBP/USD exchange rate drop to 1.5181 and recover in the space of a few minutes. A(nother) tradebot.
To be specific,
Wednesday morning fat finger
This is GBP-USD crashing to 1.5188 and then rebounding to 1.5250 in the space of five minutes. Theories? Comments? Heavy hands to hold up?
(H/T Marc Ostwald)
EMU break-up risks UK depression worse than 1930s, says ING
ING recently spelt out what a eurozone break-up would mean for the global economy — seemingly much to the delight of commentators like the Telegraph’s Ambrose Evans-Pritchard.
From the July 7 edition of the British paper:
Seven reasons to sell sterling
Here’s a bold call from UBS — sterling to end the year at $1.35.
Now, cable is currently trading just over $1.50 and last touched $1.35 in August 1985.
So what makes UBS so sure it will revisit those levels? According to Mansoor Mohi-uddin there are seven very good reasons.
Sterling in the spotlight
It’s looking like a fun week ahead for the Great British Krona, as we head further into austerity mode for the UK’s economy.
Kicking off the action on Monday are the first economic growth forecasts from the UK’s brand spanking new Office for Budget Responsibility. These will probably cut prospects down from the previous government’s estimates,
Spanish flu hits London stocks, euro
It was all going so well. In fact, it was almost time to let the Rally Monkey out of its cage and then late on Wednesday afternoon (London time)…
Bam!
RTRS-EURO <EUR=> HITS SESSION LOWS VS U.S.
Please do shut it, George
Here’s a intriguing argument for why the new British government shouldn’t talk itself up as taking action to stop the UK becoming the next Greece, as George Osborne, the incoming Chancellor, did on Monday morning.
Austerity Britain and equities
Should stock market investors fear the onset of austerity Britain?
Not necessarily, according Goldman Sachs which has examined three periods of significant financial retrenchment over the past 40 years,
The Wolfpack returns
Or maybe not.
RBS’s Alan Ruskin reckons the euro is now the funding currency of choice:
On the global stage, the stakes are even larger: to buy time for countries as far flung as the UK, US, Japan and India to get their fiscal house in order.