Monday, May 18, 2009
No sterling collapse after all?
Bloomberg: Pound a 'screaming buy' as UK attracts investment
Strategists at New York-based Citigroup said in a report last week the pound is “among the most undervalued major currencies,” trading almost 15% below “fair value” versus the dollar. Barclays predicts it will rise as much as 18% against the dollar and 11% versus the euro in the coming year. Goldman Sachs Group Inc. sees a 23% gain versus the dollar and 15% advance against the euro.
"There was an extreme undershoot of sterling versus the euro during the financial crisis,” said David Powell, of Merril Lynch.
“The fall in the exchange rate has made assets of all kinds in the U.K. more attractive to people overseas,” Bank of England Governor Mervyn King said. "That’s one of the stimulatory consequences of a lower exchange rate.”
Posted by little professor @ 11:07 AM (1458 views) Add Comment
21 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. techieman said...
LP cant remember it being a screaming buy when it was near parity - then it was - according to most people in the mdeia and on here - a screaming sell. :-).
Sounds a bit Johhny come lately to me. lets see though.....
2. britishblue said...
I don't think it is a screaming buy at all and also the article misinterprets the housing market statistics. However, a month or so ago when I suggested an upward movement in the pound I was ridiculed. I stilll believe this for the following reasons.
Currencies do come in and out for favour. The currency that has been 'in' for a while is the Euro. But with German GDP on the slide, followed by the probability of a cut in consumer spending in Germany, the great disparity of problems in the Euro zone, the Swiss and Japanese delving into fiscal stimulus and the American printing presses doing overtime, the pound may become more popular out of default against the key currencies.
Each time there has been a major shock in the UK this year (bank bail outs, the fiscal stimulus and worst then ever debt figures), the pound has gone downwards and then slowly edged upwards again. It now rest 10% higher than the beginning of the year. If by default the pound does rise in the next twelve months (out of default), it could help the UK economy because it will have a deflationary effect on imports.The Inflationary effect its demise had is already in the system.
3. paul said...
This sounds like manufactured demand stoking.
Funny how the Mervyn King is on hand to talk up the pound at a moment's notice.
Funny also how even though all of the signals point to UK residential property falling fast, UK property is suddenly 'attractive' to overseas buyers.
Funny how our banks have just as many bad debts as at the beginning of the year, and those debts are piling even higher as subprime mortgages come home to roost.
Funny how the West Bromwich Building Society near collapse at the weekend has been forgotten by the media today.
But now sterling is a 'buy'.
It just doesn't add up, I tell ye.
4. techieman said...
BB - ridiculed? where was that - i must have missed it?
I wrote this on the 1st May:
"As for the GBP - against the Euro the upmove in the Euro looked to me to be a squeeze before the last hurrah for sterling for a while. However at the moment i would need to see new lows around 8600 ish to dip a toe in to the long (Euro) side."
We are currently IMO having the last hurrah for the pound. On reflection - and looking at the indicators i think 8600 is a bit optomistic / pessimestic depending on your view. So as things stand it might be that we have had a low (around here next support - lets see if it holds).
After that a new move up ...how far? hmmm lets see.
5. mountain goat said...
TM have you looked at EWI free for 1 week stuff? It is on currencies and they recon the USD is about to break the retracement and go higher. So they agree this is Johny come lately, they very bearish on sterling (calling it weakest of the major currencies). Now if the Times and Telegraph also start screaming sterling is a buy then I recon it IS time to sell!
6. stillthinking said...
Any gain to foreign investment is matched by an equivalent loss to UK savers/earners. Not much of a stimulus.
7. techieman said...
MG - no i didnt look at what EWI have to say on anything other than EURO/ GBP. My view on EURO / GBP is consistent with that view - although we may have a bit more downside than they think i am now doubtfull it will go into the 8600s - and if it does then there could be more falls. Thats actually not to say the pundits above are wrong - in a years time the £ might be higher - but v. the Euro i think it goes to parity first. So yes maybe a screaming buy but only after some falls.
As i said i cant remember them saying that it would be a pound buy when it actually was! BTW Where's Flash - he might give us some insight?
Is that Screaming as in screaming lord such they are talking about?
8. bellwether said...
Techieman I sense the pound is going to remain strong against most currencies for as long as this global recovery story can sustain itself - a while yet I suspect.
The currencies markets are inevitably really imprecise eg saw fit to overvalue sterling against just about everything during our "mircale years" despite the glaring structural problems apparent to anyone that cared to look. No reason why they won't again.
Also more to the point everytime I've bet against sterling this year I've tended to lose!
9. techieman said...
BW - yep its a fair call.
Although i am looking for a low you are right - more confirmation is needed before dipping a toe in to the longside. Having said that i wouldnt run the £ for a long time if i were long of it. My comment on 1st may turned out right in the respect of direction, i have now changed it in terms of the extent of that move. Support from here to the prior swing low on the chart - if it holds (and depending on how well it holds) that will be the first indication that we are due a rally - even if its just a counter trend one against the downtrend. Should be a low risk long Euro trade (fameous last words!).
10. bellwether said...
TM Flash is conspicuous by his absence but he was still bullish on sterling last time I asked - probably just over a week ago.
I think the trend is for sterling getting stronger for now but a counter trend is totally possible although I was thinking we might need a big reversal on stocks for that to happen???
If stocks don't reverse the thiking seems to be recovery in financials blah blah,e nd of recession, UK tends to bounce back quickly etc, noone is currently concerned about our debt or our gargantuan and barely deflated property bubble.
11. hpwatcher said...
no one is currently concerned about our debt or our gargantuan and barely deflated property bubble.
Funny that.....perhaps they are thinking that if you ignore it for long enough, it will go away.
12. flashman said...
Hello tm and bellwether: Just got back from Frankfurt. No matter how often I go, I am always amazed by how long they take to pour a beer. Up to half an hour sometimes. The Krauts still dream of talking London's crown but I cant help thinking that their beer pouring tardiness explains why they never will. As far as GDP goes, I have been bullish for a couple of months now and see no reason to change this stance for now. Anecdotally, I have never seen the Germans more depressed which surely doesn't bode well for the Euro. More technically, the reason for the GDP rally against the USD is that dollar supplies are noticeable increasing . One manifestation of his is the 20% decrease in Libor over the last four weeks or so. The previous rise in the dollar was caused by the dubiously named flight to quality. Ironically, now that the US stats are 'improving', the dollar is falling because these improved figures lead traders to believe that the general subsiding of perceived risk will mean that some money will flow back into other currencies. The pound suffered most from the flight to quality and so it is reasonable to believe that it should benefit the most when money flows back out of the dollar
Keep an eye on the TED spreads and to a lesser extent the Libor OIS spreads. They will let you know when sentiment might flow back to the dollar. For now the pound is a good bet getting in and out is essential. Its not a strong enough proposition to buy and wait
13. crunchy said...
Before I take a break. Pound looks set to strenghten against euro for next 2 weeks short term. I am expecting a two day bounce tommorow maybe, before it continues to strenghen yet further. Last week was a great week for sterling bulls!
Good luck!
14. flashman said...
It has always been dangerous to take long term views on the pound because it is what I call a 'helter skelter' currency. For the last 50 years or so, it has violently reversed its course many times. My theory is that it is caused by no one knowing how to view Britain. On the one hand Britain is a post imperial, declining world power with an ever dying industrial base. But, on the other hand Britain punches above its weigh politically and is still the 4th or 5th biggest economy in the world. We also own huge slices of the worlds oil/mineral wealth and have the worlds biggest (by some measures) financial center. Incidentally foreigners salivate at the prospect of our financial industry being severely regulated. The Germans in particular would love to be bigger players. Their call for stiff regulation is almost entirely aimed at crippling London.
15. timmy t said...
Call me cynical, but if a bank really thought a currency was going to go up that much, wouldn't it just go round buying up all it could, rather than telling the market? Bankers aren't really known for their desire to make other people rich are they? I'm sure I'll be corrected by people with more intimate knowledge than me, but isn't this like EA's telling us houses are going up?
16. flashman said...
timmy t: The big houses have always issued forecasts. Obviously their clients get first access There is nothing sinister in this practice. Their analysts are just laying out their stall.
I dont know how most HPC bloggers sleep at night. Do you all check under your beds for the ramping, vested interest bogeyman? It must be exhausting.
17. timmy t said...
Thanks Flashman - thought you'd bite!
18. flashman said...
timmy t
you're welcome.
19. bellwether said...
Flashman the bloggers can be a cynical lot. Like ugly women who mistakenly believe that everyone is macking on them the paranoia conceals the wish.
20. quiet guy said...
So the pound is a 'screaming buy.' Now I understand why we are printing so many ...
21. timmy t said...
It should say 'Pound is screaming"Bye"'