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Guest muttley

One thing I don't understand.Why isn't the pound falling against the dollar?

I don't think todays decision by the Fed means the BoE will reverse their decision to lower rates in August,but it should rule out further cuts.

The ECB make their decision on Thursday.

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A question:

with increasing IRs, does the relative effect of 0.25% reduce because the proportionate increase is less?

At what point would 0.50% begin to be a more realistic and effective tool?

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A question:

with increasing IRs, does the relative effect of 0.25% reduce because the proportionate increase is less?

At what point would 0.50% begin to be a more realistic and effective tool?

Just as soon as the panic sets in and sterling starts falling quickly. Did I see on the news it dropped 0.75 cents today?

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Just as soon as the panic sets in and sterling starts falling quickly. Did I see on the news it dropped 0.75 cents today?

That could get interesting - if, say, the £ drops by 3-5 US cents in the next week and the eurobank raises rates prompting similar drops compared to the euro it could put pressure on the November decision.

Really, it's going to come sometime, it's just a matter of when. Why not sooner rather than later?

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That could get interesting - if, say, the £ drops by 3-5 US cents in the next week and the eurobank raises rates prompting similar drops compared to the euro it could put pressure on the November decision.

Really, it's going to come sometime, it's just a matter of when. Why not sooner rather than later?

Shouldn't our rates now rise this month? It will be interesting to see how the stock market performs tomorrow and the rest of the week. How have the interest rates fared in the past? Doesn't sterling normally maintain a healthy difference in the interest rate above the dollar rate?

<quote:The Impact of a Rise in Interest Rates on UK Sterling Exchange Rate

The interest rate influences the exchange rate because it influences the demand and supply of currencies on the foreign exchange markets. A good deal of the trade in foreign currencies is for speculative purposes - traders moving funds from one currency to another to take advantage of price movements or to take advantage of better returns in different countries.

For example, if the rate of interest in the US was 3% but was 5% in the UK, there may be advantages gained from transferring funds in dollar based securities to those denominated in Sterling. (Think of it in terms of moving money from a bank account paying 3% to another bank account paying a higher rate of interest.) If this happened, there would be a move towards selling dollars on the foreign exchanges and buying Sterling, with the result that the demand for Sterling would rise and the supply of dollars would also rise. This would put pressure on the price of Sterling and push its value up against the dollar.

The end result would be an appreciation of the pound meaning that it would be worth more in terms of dollars (e.g. rising from £1 = $1.60 to £1 = $1.70). This in turn means that the US buyer now has to give up more dollars to buy the same amount of Sterling, which is an effective rise in price for imports.>

Now the difference is just 0.5 % the pound will likely start sinking as the currency is dropped?

As for future direction of our rates I guess the latest house price data will firm up the decision to hold or even push up our rates while the news from retail will push in the other direction.

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Euro rates will go up too if the funds keep on dumping bonds.

Looks to me as if many banks have loaded up on cheap debt, possibly decades worth and now can squeeze the borrowers for the profit. I wonder who has leant all the money out at low fixed rates though and would get caned under such a scenario? There will be defaults, the change in US bakruptcy laws have already headed that one off, almost all looks planned to make the banks a mint.

http://story.irishsun.com/p.x/ct/9/id/091e...f10b3527f6df38/

European funds exit eurozone assets on fears of inflation: pollPublished: Tuesday, 1 November, 2005, 10:09 AM Doha Time

LONDON: Hawkish comments from European Central Bank officials on inflation and interest rates led fund managers in continental Europe to make deep cuts in their holdings of eurozone bonds and stocks in October, a Reuters poll showed.

But the poll of 10 fund management firms showed their overall exposure to stocks and bonds was little changed. Equity holdings were unchanged at 50.6%, while bond holdings were at 40.4% after 40.7% in September. Cash holdings rose to 3.9% from 3.3%.

But holdings of eurozone bonds were cut to 50.9% from 57.9% in September, while eurozone equity allocations fell to 24.8% from 31%.

In place of eurozone debt, funds bought US and Japanese bonds and replaced their eurozone equities with US, Japanese and non-eurozone European stocks.

Edited by OnlyMe

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For example, if the rate of interest in the US was 3% but was 5% in the UK, there may be advantages gained from transferring funds in dollar based securities to those denominated in Sterling. (Think of it in terms of moving money from a bank account paying 3% to another bank account paying a higher rate of interest.)

Yes for cash, but not for stocks, surely?

Stocks usually fall with higher interest rates, so Sterling based securities would fall with higher rates relative to Dollar based companies enjoying a lower rate...

Edited by tonification

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Guest muttley

Now the difference is just 0.5 % the pound will likely start sinking as the currency is dropped?

Pound up against the dollar!

Oy! :unsure:

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No expert, but the reason sterling hasn't tanked against the dollar is presumably that the markets have already priced in the US rise. As long as the markets carry on believing the Fed are going to raise US rates I'd have thought sterling would remain about the same, but as soon as they think the MPC will have to raise them over here sterling ought to go up....

No. It's no good. I genuinely don't understand it ....

BA

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Guest muttley

No expert, but the reason sterling hasn't tanked against the dollar is presumably that the markets have already priced in the US rise. As long as the markets carry on believing the Fed are going to raise US rates I'd have thought sterling would remain about the same, but as soon as they think the MPC will have to raise them over here sterling ought to go up....

No. It's no good. I genuinely don't understand it ....

BA

Just a couple of months before the last interest cut there was a general feeling that the next move was up.So why didn't the pound weaken when it was decided that rates had to go down?

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One thing I don't understand.Why isn't the pound falling against the dollar?

I don't think todays decision by the Fed means the BoE will reverse their decision to lower rates in August,but it should rule out further cuts.

The ECB make their decision on Thursday.

by the way... we are too tied up with the us economy.

It is possible if our interst rates are not following the us trend that investors can make a killing on the pound.. causing a run on the pound..

causing the pound to fall against the dollar,, killing our ability to trade with the us and hurting trade with the rest of the world.

Guess what.. we are only little.. we need to raise interest rates..

they will now raise..

This was going to happen at some point.. even if the yanks raising theirs didn't require us to follow..

The economic state of the uk... and the world... now require investments and currency to be guarded.

Interest rates must now rise.

Not because I want to buy a house...

and they won't drop because people want cheaper mortgages..

that is such a small consideration with fiscal policies..

House prices have helped kill the economy..

but they will not be supported to ensure that it is permanently dead

Edited by apom

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  • 301 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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