Wednesday, Feb 28, 2007
Looks like the Yen Rise is having an effect
Reuters: Stg slides vs yen, investors unload carry trades
Something is happening to Sterling.
"Sterling fell sharply against the yen on Tuesday .... with the move also dragging the pound down versus the euro." Remember a rate rise may also occur in defence of the currency.
However ..to be fair... the article also mentions Blanchflower's belief in voting for a cut soon ... "which would leave us with a three-way split on the MPC," Rabobank senior proprietary trader Lee Ferridge said.
I think the MPC meeting on 8 March will be one where the members earn their pay... could be a long one.
Posted by sirgoogle @ 05:17 AM (43 views) Add Comment
5 Comments
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1. sirgoogle said...
This is interesting because Sterling and the Euro have been intertwined for years. Could this be a shift in that relationship?
2. paul said...
Only intertwined by the carry trade, which focuses on the cheap yen and expensive pound.
If the pound slips more, Yankee Doodle Blanchflower's bleats will be brushed aside and rates will be raised.
3. Dohousescrashinthewoods said...
So, Sterling is falling, the carry trade is unwinding, the stock markets are plummetting, and the US economy is headed for a sub-prime time-bomb-led recession (or depression).
Er, "the sky is falling"?
4. harold said...
Yes, Blanchflower's cut will be vetoed by those wishing to defend the pound. It all makes for 'no-change' in March I fear.
5. paul said...
I doubt "no change" will be an option for the MPC.
If they do, they risk further flight from the pound and a resurgent house price boom, as buyers and sellers start to believe that the upwards rate trend is closing. They've made this mistake once before with a bung to the housing market in the form of the August 2005 rate cut - which was later deemed to have been imprudent.