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What Just Spooked Sterling?

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I found it interesting yesterday in the Budget that one of the reasons given for lower growth going forward was the 'higher than expected inflation'. Apparantly it's the wrong sort of inflation, ie imported and not caused by internal wage growth and therefore increasing government spending without a corresponding increase in the tax take. We may be nearing the point where a rise in Sterling prompted by a rise in interest rates is seen as less damaging to growth/government spending than the continued depreciation in Sterling caused by leaving rates on hold causing ever increasing inflation.

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I found it interesting yesterday in the Budget that one of the reasons given for lower growth going forward was the 'higher than expected inflation'. Apparantly it's the wrong sort of inflation, ie imported and not caused by internal wage growth and therefore increasing government spending without a corresponding increase in the tax take. We may be nearing the point where a rise in Sterling prompted by a rise in interest rates is seen as less damaging to growth/government spending than the continued depreciation in Sterling caused by leaving rates on hold causing ever increasing inflation.

It would appear that the govt and the BoE are at odds then. Mystic Merv has already said he views wage inflation as the wrong type.

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You've got Cameron saying he wants to get britain making things again while also calling for a tax on 'carbon' at 13 pounds a tonne.

The markets are pricing in inept leadership.

Oh , and poor retail sales as was mentioned earlier.

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Apparently markets are catching on to the fact that nothing has actually been fixed/resolved in the economy at large.

Who could have guessed that printing money wouldn't really fix any of the underlying problems and only serve to transfer the debt problem from the bankers to the public? Noone saw that coming.

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Sterling falls, gilts rise after UK retail sales

Sterling fell half a cent to $1.6149 GBP=D4 after retail sales in February fell 0.8 percent on the month, slowing the annual rate of growth to 1.3 percent from 5.1 percent. A Reuters poll of economists had
expected
a monthly decline of 0.6 percent and a slowdown in the annual rate of growth to 2.3 percent.

It's the unexpected...oh never mind.

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retail -0.8.

retail figures always cause a move between gbp/eur for obvious reasons. It looks far worse on intraday charts in pips though, the pound is currently down 0.5% against the euros so not quite time to panic yet :D

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If retail sales are down -0.8%, you would expect that to help the balance of trade and bolster sterling.

normally when it is lower than forecast it is bad for currency.

edit to add - forecast was -0.5 and last figures were 1.5 revised down from 1.9. The figures are telling the tale of reduced consumer spending and economic activity.

Edited by richyc

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retail -0.8.

retail figures always cause a move between gbp/eur for obvious reasons. It looks far worse on intraday charts in pips though, the pound is currently down 0.5% against the euros so not quite time to panic yet :D

Price inflation without corresponding salary inflation was always going to hurt retail.

How they could get away with not raising interest rates on the premise that it would wreck the economy by 'taking money out of peoples pockets' thus killing retail whilst ignoring the fact that price inflation (as a direct result of said low rates) relative to non-increasing salaries will do exactly the same thing, without any challenge by the mainstream financial media or market pundits is beyond me.

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Also in the small print of the budget yesterday was the announcement that Merv is to rebalance the countries holdings of foreign currencies. i.e we are going to be selling a load of spanking brand new pound notes on the markets to keep the pound low to help rebalance the economy. If you look at the OBR predictions in yesterdays budget the predictions for the USD and EUR to Sterling exchange rates show no change from today yet the economy is predicted to grow and Georgie boy will have sorted the deficit out. Can not happen unless there is currency intervention by Merv.

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Apparently markets are catching on to the fact that nothing has actually been fixed/resolved in the economy at large.

.

The markets, like the sheeple, must be pretty stupid !!!

Everyone's still talking about the recession ( even on tele ) despite the fact we're not officially in recession....i guess we're in recession :lol:

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I found it interesting yesterday in the Budget that one of the reasons given for lower growth going forward was the 'higher than expected inflation'. Apparantly it's the wrong sort of inflation, ie imported and not caused by internal wage growth and therefore increasing government spending without a corresponding increase in the tax take. We may be nearing the point where a rise in Sterling prompted by a rise in interest rates is seen as less damaging to growth/government spending than the continued depreciation in Sterling caused by leaving rates on hold causing ever increasing inflation.

It's been apparent to me for a long time that dim witted so called capitalism/free market/free enterprise advocates fail to realize that without the ordinary man in the street having "spare" cash to spend the whole thing fails.

Inflation without wage inflation does not work. Putting up interest rates will not cure the problem this time because the inflation is not being caused by increased demand.

As to why sterling got "spooked", my guess would be that it is a reaction to the rubbish budget and the realization that this government haven't got a clue.

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Probably a reaction to all the relentless bullshine spouted by the Coalition reps and spokesthingys with all the obfuscation and lies since the budget. That plus the same from the MSM and now on the sovereign bankruptcies highlighted by Portugal - all likely leading even to the markets getting a bit dizzy.

The crazy inflation figures won't have helped either. Mervyn The Discredited seems to have stayed in his bunker while all that has been going on as well.

It's all so "steady as she goes" :P

Edited by billybong

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  • 309 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
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      • up 5%



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