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Mikhail Liebenstein

Dollar Set For Decline To Gbpusd=1.85

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There's a few of these forecasts about, market oracle had one last week stating 1.90 GBP to $ and 1.30 GBP to Euro. What's the chances of the UK doing more QE. Also that would have the $ index somewhere in the low 60's.

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http://www.telegraph.co.uk/finance/currency/8047468/Dollar-set-for-sharp-decline-Goldman-forecasts.html

I never trust sacks of gold, but given the US outlook it could be true this time in which case sacks of Gold would make a good investment as would hanging onto your Sterling.

If that were allowed to happen there would be an almighty crash in housing, along with just about everything else, including gold and employment.

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If that were allowed to happen there would be an almighty crash in housing, along with just about everything else, including gold and employment.

Umm, why?!

A strong pound makes all our imported food and energy cheaper.

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If we dont do QE then the pound could do well, but the tw*ts at BOE will probably join in the race to the bottom. Myself I'm going for a currency basket excluding euro and $ i.e. £/gold/CHF/BRL/CNY where the fact that BRL/CNY pay very good interest rates will hedge me against inflation to some degree as well as protect against a sharp fall in the £.

Edited by goldbug9999

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Umm, why?!

A strong pound makes all our imported food and energy cheaper.

1) A low pound makes British property and investment attractive to international buyers, thus helping to set a floor on HPC.

2) The UK, more than just about any other country in the world, is heavily dependent upon international trade in services. These services get priced out of the international market with a strong pound. Loss of employment and foreign revenue.

3) Deflation becomes a much greater issue (as you said imported stuff becomes cheaper). This means that gold, priced in Sterling, will come under pressure.

4) Look at Japan, for an example, except Japan makes things, whereas with services, there is little room for manoeuvre when they become expensive...there's no scaling of services...

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NIESR say that our growth crashed in the last Q--down over 50%.

Sterling anyone?

Growth for the whole first half of the year is already 1.6%, no one really thinks we are going to the same in Q3 & Q4. Most forcasts for the year seem to be 2-2.5%, implying growth of 0.5% ish in Q3 and Q4.

If we can grow even by 1-2% next year whilst we are cutting the defecit and house prices are falling I think that would be a good result.

If sterling does strengthen it will be because of extreme dollar weakness (Priniting Presses?) rather than sterling strength .

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Growth for the whole first half of the year is already 1.6%, no one really thinks we are going to the same in Q3 & Q4. Most forcasts for the year seem to be 2-2.5%, implying growth of 0.5% ish in Q3 and Q4.

If we can grow even by 1-2% next year whilst we are cutting the defecit and house prices are falling I think that would be a good result.

If sterling does strengthen it will be because of extreme dollar weakness (Priniting Presses?) rather than sterling strength .

Nonetheless it is hard to imagine that the government will let Sterling appreciate like this. They are, in essence, giving away economic growth to other countries by doing so.

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Nonetheless it is hard to imagine that the government will let Sterling appreciate like this. They are, in essence, giving away economic growth to other countries by doing so.

http://finance.yahoo.com/news/Weak-economy-has-nations-apf-818629741.html?x=0&sec=topStories&pos=5&asset=&ccode=

Weak economy has nations waging currency wars
Tensions over currency manipulation threatens to dominate 3-day meeting of global leaders
International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn gestures during the opening news conference for the annual IMF and World Bank meetings, Thursday, Oct. 7, 2010, in Washington. (AP Photo/Haraz N. Ghanbari)
Martin Crutsinger and Greg Keller, AP Business Writers, On Thursday October 7, 2010, 7:07 pm EDT
WASHINGTON (AP) -- Fears of a full-blown currency war flared Thursday as the dollar fell to an eight-month low against the euro and the U.S. stepped up pressure on China to let its currency rise.

The US are enjoying the rise in the Euro but would like to see the same happen for the Chinese curency which is sometimes known as the Reminbi (sp?) and at other times as the Yuan. I doubt the £ factors in the US war against the others to gain a competitive edge. We are in IMF's good books due to low debt and effecient debt control measures in place and as long as that remains true Sterling should hold on for awhile. But if our growth falters and QE2 looms its goodbye Pouind. 1.35 before Crimbo?

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Who the hell runs the FX desk at Goldman?

Still, one out of two ain't bad. Mind you' they've been saying GBP:USD at $1.85 for the last 2 years. Even a stopped clock, etc, etc...

Their timing is off, and I'm not sure about their Euro predicition either... still, never mind.

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http://finance.yahoo.com/news/Weak-economy-has-nations-apf-818629741.html?x=0&sec=topStories&pos=5&asset=&ccode=

Weak economy has nations waging currency wars
Tensions over currency manipulation threatens to dominate 3-day meeting of global leaders
International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn gestures during the opening news conference for the annual IMF and World Bank meetings, Thursday, Oct. 7, 2010, in Washington. (AP Photo/Haraz N. Ghanbari)
Martin Crutsinger and Greg Keller, AP Business Writers, On Thursday October 7, 2010, 7:07 pm EDT
WASHINGTON (AP) -- Fears of a full-blown currency war flared Thursday as the dollar fell to an eight-month low against the euro and the U.S. stepped up pressure on China to let its currency rise.

The US are enjoying the rise in the Euro but would like to see the same happen for the Chinese curency which is sometimes known as the Reminbi (sp?) and at other times as the Yuan. I doubt the £ factors in the US war against the others to gain a competitive edge. We are in IMF's good books due to low debt and effecient debt control measures in place and as long as that remains true Sterling should hold on for awhile. But if our growth falters and QE2 looms its goodbye Pouind. 1.35 before Crimbo?

I personally do not see fundamentally why Sterling should be so favoured over other currencies. Perhaps it is just small enough to be easily manipulated by the FX trading algos.

When you look at what Soros did to Sterling in 1993 with about $2 billion and when you look at the gargantuan size of the money flows in the FX market today, the tiny boat that is Sterling will probably be sailing in very stormy seas for some time to come...

Edited by Toto deVeer

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Nonetheless it is hard to imagine that the government will let Sterling appreciate like this. They are, in essence, giving away economic growth to other countries by doing so.

Agree, the BOE seem to be experts in weakening sterling. The problem they may have is that the US are in a much stronger position to weaken than us. They have much lower inflation and also the world "reserve currency". They can print with much less risk of an all out rout in the $.

It looks almost certain now the Fed will print and the only question is the exact details.

With the CPI at over 3% ,producer price inflation rising (http://www.businessweek.com/news/2010-10-08/u-k-producer-prices-increase-more-than-forecast.html), The VAT rise in January and general increases in key commodoties. I can see inflation being 4-5%+ by the end of the year.

If the BOE print with inflation at such a high level there would be a substantial risk of a sterling / inflation crisis. The MPC would be finished.

Edited by mattyfc

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Agree, the BOE seem to be experts in weakening sterling. The problem they may have is that the US are in a much stronger position to weaken than us. They have much lower inflation and also the world "reserve currency". They can print with much less risk of an all out rout in the $.

It looks almost certain now the Fed will print and the only question is the exact details.

With the CPI at over 3% ,producer price inflation rising (http://www.businessweek.com/news/2010-10-08/u-k-producer-prices-increase-more-than-forecast.html), The VAT rise in January and general increases in key commodoties. I can see inflation being 4-5%+ by the end of the year.

If the BOE print with inflation at such a high level there would be a substantial risk of a sterling / inflation crisis. The MPC would be finished.

What I cannot understand is where is all this inflation coming from? It does not seem to be happening in Japan, the US or Europe.

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What I cannot understand is where is all this inflation coming from? It does not seem to be happening in Japan, the US or Europe.

Nonetheless it is hard to imagine that the government will let Sterling appreciate like this. They are, in essence, giving away economic growth to other countries by doing so.

You've answered your own question. Trashing your currency is not a one-way recipe for economic success.

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What I cannot understand is where is all this inflation coming from? It does not seem to be happening in Japan, the US or Europe.

Its a feed through effect of lowering our interest rates by over 4% in the space of a few months during the crisis and the subsequent sterling devaluation. Whats also interesting is that money supply growth is currently crashing (just crossed the zero point this month, probably going -ve very soon ...) while prices continue to rise, so soon were going to have deflation yet prices will keep going up - something is seriously f*cked up :ph34r: .

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Agree, the BOE seem to be experts in weakening sterling. The problem they may have is that the US are in a much stronger position to weaken than us. They have much lower inflation and also the world "reserve currency". They can print with much less risk of an all out rout in the $.

It looks almost certain now the Fed will print and the only question is the exact details.

With the CPI at over 3% ,producer price inflation rising (http://www.businessweek.com/news/2010-10-08/u-k-producer-prices-increase-more-than-forecast.html), The VAT rise in January and general increases in key commodoties. I can see inflation being 4-5%+ by the end of the year.

If the BOE print with inflation at such a high level there would be a substantial risk of a sterling / inflation crisis. The MPC would be finished.

That's my take on it also, they are itching to print but inflation is not playing ball and is not likely to for a couple of years.

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Its a feed through effect of lowering our interest rates by over 4% in the space of a few months during the crisis and the subsequent sterling devaluation. Whats also interesting is that money supply growth is currently crashing (just crossed the zero point this month, probably going -ve very soon ...) while prices continue to rise, so soon were going to have deflation yet prices will keep going up - something is seriously f*cked up :ph34r: .

OK I'm thinking this through now, RPI stays stubbornly high thanks to the latent effects of devaluation/ZIRP but its cost-push inflation and so not driven by money supply growth (which is crashing).

So RPI ...

keeps going up perhaps to the extent that it precludes QE (one can only hope BOE are not compltely wreckless).

Domestic asset values including housing ...

crash because the price is still driven by a soon to be falling money supply.

£ ...

in the absence of QE continues to appreciate until it cancels out the import driven RPI inflation

Commodities, Gold etc ...

continue to appreciate because of general world wide fiat currency debasement. However, a bank or sovereign crisis may clobber these temporarily ...

Equities ....

falling money supply going forward should put a ceiling on UK stocks, but they may be kept going by overseas investors flocking to £ assets

Much seems to depend on whether we do or dont QE ...

Edited by goldbug9999

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Hang on to your gold, boys!

George Osborne ready to back Bank of England on quantitative easing - The Guardian, Saturday 9 October 2010.

George Osborne last night signalled that he would back a request for a fresh wave of money creation from the Bank of England if Threadneedle Street felt it was needed to boost growth.

Amid signs that the economy has cooled since its strong growth in the spring, the City believes the Bank may seek to join the US Federal Reserve in reviving its quantitative easing programme after this month's tough public spending announcement.

More. http://www.guardian.co.uk/business/2010/oct/09/george-osborne-imf-world-bank

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http://www.forexrate.co.uk/news/short-term-correction-with-sterling-likely/

SHORT TERM CORRECTION WITH STERLING LIKELY

6 October 2010 Forex markets remained unchanged overnight as markets digested volatile price action from the last 48 hours. The Euro saw fresh yearly highs after touching $1.3839 versus the USD in late trade yesterday and remains firm against a number of its counterparts. The US Dollar however remains very much bearish against the majors however technical indicators may signal a possible reversal in trend as speculators look to take profit from the key psychological levels currently being tested. Broader price action overnight seems corrective more than anything else and we have seen some reasonable risk reduction over the past 24 hours in short Dollar positions.

Sterling, meanwhile, looks set to remain firm versus the dollar, underpinned by negative USD sentiment, higher investor risk appetite and yesterday’s surprise rise in the services PMI which has helped to ease some concerns regarding a double dip scenario in the UK. However, while it saw 2 month highs versus the USD, sterling continues to lag the euro as markets debate the prospect of further policy action from the Bank of England.

EURGBP is close to year’s highs while cable struggles to break 1.60. The question is how much additional QE is now priced in for the pound? Given the amount of airtime this topic has received the past few weeks and the clear underperformance of the pound and likewise UK 10yr close to historical lows, I think there is a chance the pound is oversold and we are due some sort of short term correction or at least a sustained move higher in the TWI towards 81 area and GBPUSD towards 1.6200. Much of this will depend on the data starting to stabilise.

.../

Overall price movement remains largely in favor of the Euro at present, markets are clearly bias towards USD weakness and general sentiment surrounding Sterling is very much negative with bearish price movement expected over the coming days.The market currently presents an excellent price for any Euro sellers, Dollar buyers should take advantage of the current highs and Sterling sellers should look to cover positions or work Stop orders to protect against further bearish movement. Stop orders are useful when the market is in a downward trend and allows buyers to minimise risk and exposure to what has once again become a very volatile market.

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  • 142 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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