Posts tagged 'Sterling'

A double deficit and a falling pound

As many economists have noted, a key problem for the UK is its negative international investment position (IIP), which fuels a large part of the country’s current account deficit. This is derived from the difference between total assets and liabilities of rest of the world holdings (RoW), and constitutes a net asset position of £269bn (in favour of foreigners).  Read more

About that Sports Direct rout

While lots of people marvelled at the supposed resilience of Britain’s benchmark stock index on Friday in the wake of the sterling crash, one particular faller stood out. Read more

Why this is more than a flash crash in sterling

This guest post is from Themos Fiotakis, Global Co-Head FX & Rates Strategy, UBS Investment Bank Read more

Rate cuts and sterling MMFs

Markets are increasingly expecting the Bank of England to cut the Bank Rate on Thursday.

As BoAML’s economic and strategist team observes in a note on Tuesday, the BoE really has nothing to gain by waiting. As a result they’re anticipating a 40 basis point cut, with a good chance of only 25 basis points because “Carney has said he is concerned about taking rates ‘too low’”. The current Bank rate is 0.5 per cent. Read more

On the non-viability of an independent Scotland staying in the sterling zone

As is being widely reported (exclusive to all newspapers), Scotland is considering vetoing Brexit, if not launching a second referendum to express its pro-European Union feelings in an independent context.

Somewhat overlooked in that context, however, is the role played by the sterling zone in the original Scottish referendum.

An independent Scotland after all wanted it all: independence, European Union membership and continued use of sterling.

In the event Scotland did vote ‘leave the UK’ in a second referendum, this time round the chances of it being allowed to stay within the sterling zone would be decreased sizeably. Read more

Scotland and Sterling — whose currency is it anyway?

This guest post is from Charles Proctor, a partner at lawyers Fladgate and an acknowledged expert on the legal aspects of money…


Who “owns” sterling?

With the date of Scotland’s independence referendum fast approaching, the debate over a currency for an independent Scotland has reached fever pitch. Read more

Scottish currency union, the unilateral Montenegro option

Here’s an interesting point from Capital Economics’ Roger Bootle on Tuesday regarding a potential Scottish currency union. They could go down the unilateral adoption route.

To recap, independent Scotland wants to keep the pound via some sort of currency union, ideally based on the BoE continuing to accept Scottish assets as collateral in exchange for sterling liquidity.

The UK, however, is not willing to accept this because it would mean unrestricted UK support for Scottish banks, which may or may not now be regulated to the same standards. Read more

Cataclysmic hyperbole?

Back in the days of the Great Northern Rock bank run, a long conversation was had in the newsrooms of most media organisations.

Should we hold back from reporting on what are still smallish queues given the potential to exacerbate panic for no reason? Or do we consider this a legitimate story, that we didn’t cause, and cover the hell out of it? Read more

The central bank vol control game

If this is all getting confusing…

Sterling fell on Tuesday after Bank of England governor Mark Carney damped expectations of an imminent UK interest rate.

Appearing before MPs on the House of Commons Treasury select committee, Mr Carney repeatedly stressed that despite a robust recovery in employment and GDP, wage and productivity growth had been slower than expected, indicating there was still additional spare capacity in the labour market…

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The currency question Alex Salmond cannot answer

This guest post on the issue of Scottish independence is from Paul Donovan, Global Economist at UBS in London…


As the referendum on Scottish independence approaches, the rhetoric around the currency arrangements for an independent Scotland has escalated. An unnamed British cabinet minister has been cited as suggesting that currency union could be used as a bargaining chip (specifically in exchange for Trident bases). The casual assumption that a fundamental economic structure can be bargained for political capital is deeply troubling; it is just such approach that created the Euro with the flawed architecture that it has today. Read more

Guest post: Back to the future with Scottish currency

The following is a guest post from Chris Cook, a senior research fellow at the Institute for Security and Resilience Studies at University College London. His work is focused on a new generation of networked markets – which will, in Chris’s view, necessarily be dis-intermediated, open, decentralised and, therefore, resilient. But his approach is informed by the past, and it is there that he finds a framework for an independent Scotland to use the pound, a Plan A Plus.

The rejection by all the Westminster parties collectively of the SNP’s Plan A for a post-independence UK currency union has elicited a string of possible Plan B solutions, several of them already considered and rejected as inferior to Plan A by the SNP’s expert group of ‘wise men’.

But the current debate is ill-founded, since the UK can have no more control over who uses the £ symbol as a unit of account, than they can have control over the use of metres and kilogrammes. Read more

Sterling’s path, now with guidance

Have a chart from HSBC which, once the key is provided, will explain sterling’s weakness, probably:

Before we get there though we should touch back on Carney’s forward guidance thing, of which there are numerous different takes. Here are three for the hell of it: Read more

One very large divergence please (with a dollar chaser)

According to Nomura, since 1980, there are only two periods of economic divergence — between the US and Europe and the UK — comparable to what we are observing currently.

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Krona post the first Carney-val [updated]

That’s sterling off 1.2 per cent at pixel… with the weaker currency and generally loose tone of the statement below pushing the Footsie up some 2 per cent.

Here’s the statement that started the dive (our emphasis): Read more

Breaking bad

Rising inflation expectations and a diving Great British Krona helped another leg downhill on Tuesday by dire production data.

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With great power etc

This does smack of desperation, doesn’t it? From the FT on Thursday morning:

Osborne will use his Budget on March 20 to reinforce his message of “fiscal conservatism and monetary activism” by clarifying how the government intends to use monetary policy to get the economy growing again.

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Currency moves contextualised

That’s the euro down 0.4 per cent or so against the dollar and crossing the $1.30 mark. Sterling (aka the Great British Krona) is also continuing its torrid start to 2013, losing another 0.9 per cent against the dollar and touching $1.50. Read more

‘This downgrade is nonsense!’

That’s the considered opinion of Julian D. A. Wiseman (most recently head of UK rates strategy at Société Générale but writing on his personal blog here) on the Monday after Moody’s cut its credit rating for the UK from Aaa to Aa1, taking the Bank of England down with it. For those keeping count, that makes it a downgrade that was neither surprising, nor informative nor, in itself, damaging (as Martin Wolf put it)… but more to the point it was just plain silly. Read more

A Minutes worth of sterling freefall [updated]

Here’s the dovish BoE minutes that started sterling sliding (click through for the pdf): Read more

Thursday con Carney [updated with written evidence]

It’s Carney live. We know George Osborne is frustrated excited. Mark Carney, the next Governor of the Bank of England and the man Osborne once called “quite simply the best, most experienced and most qualified person in the world to do the job”, is in front of the Treasury select committee.

Here’s the live feed:

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The wonders of the FX universe

Dark matter may more commonly be associated with physics, space exploration and Professor Brian Cox, but, according to Deutsche Bank’s FX strategist George Saravelos, there’s a good chance that it’s becoming a recognisable force in the world of foreign exchange too.

Of course, whilst you need complex structural analysis of the universe to detect the real dark stuff, in FX its presence is arguably more easily sniffed out. Mostly, says Saravelos, via the closer inspection of short-term derivative flows and the murky parts of balance of payment statistics. Read more

A sterling inflow

So, would a sovereign downgrade hurt sterling? And if so, how much? It’s hard to model this as historic comparisons are muddy and sterling crosses each obviously carry their own difficulties. Consider this chart from Morgan Stanley, by way of illustration:

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Krona watch

The collapse in sterling is really quite eye-catching.  Just in time for summer…

M&Aybe a reason for a resilient pound?

So, the UK has apparently been the most targeted nation for inbound M&A in 2012 so far, coming out on top in both nominal terms and as a percent of GDP.

He argues: Read more

Sterling corporate bond issuance surges

Sterling corporate bond issuance is soaring, but euro-denominated bond sales are at a six-year low, reports the FT. UK and international companies have sold more than $42bn worth of sterling-denominated bonds so far this year – a 41 per cent increase compared with the same period last year, according to Dealogic. Meanwhile, euro-denominated corporate bond sales have slumped almost a fifth, to $179bn – the lowest figure for the period since 2005. Dollar bond sales have increased 7 per cent. Corporate borrowing costs have climbed in the UK recently, but not to the same extent as in Europe, leading several continental companies to turn to London’s bond market, including France’s GDF Suez and EDF. UK investors are also open to longer-term bonds than the European market.

Why sterling just got splattered

Impressive move following the Bank of England rebooting QE…

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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, repeat nothing, to do with sterling’s decline. Read more

BoE MPC minutes – market reaction and comment

The Great British Krona has taken a knock following the publication of the September MPC minutes.

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A sterling safe haven

Here’s a safe haven idea you may not have thought of.

The Great British Krona. Read more

Selling Italy, buying UK [updated]


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