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FTBagain

Boe Ir 4.5%, Fed Ir 4%

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This could be the begining of a sustained fall in the pound relative to the dollar. The next few days could be quite interesting. Of course the current slide could just be the begining of the next movement cycle and we may well need the gap to close further or even have the US rate above UK rates for a time, but I bet the BoE will be getting nervous if the pound continues to fall.

These things can develop a momentum all of their own, the worst case scenario for the MPC in the short term is that the fall does not gather pace until after their next meeting. An extra ordinary meeting to defend the pound will change the markets perception of the situation considerably.

Given the apparent sensitivity of the housing market to the recent 0.25% drop in interest rates, it would not take much of a rise to putting the HPC well and truely back on schedule!

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I think you have mistaken a $ strengthening story (to be expected when raising rates) for a £ weakness story.

It does not matter as far as inflation is concerned because oil is priced in $. If the £ falls against the $ (or the $ rising against the £) then fuel costs, in £, go up.

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Remember the market expects US interest rates to continue rising at a 'measured pace' over the next few months, so these movements will already be priced into the exchange rate.

Generally, markets move when expectations change, not when those expectations come to pass (economists call this the 'Rational Expectations' model).

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Remember the market expects US interest rates to continue rising at a 'measured pace' over the next few months, so these movements will already be priced into the exchange rate.

Generally, markets move when expectations change, not when those expectations come to pass (economists call this the 'Rational Expectations' model).

Agreed, but the consensus on the direction of UK rates is in a state of flux (all be it slow) just at the moment. Secondly, if a big 'mover' decides they do not like what they are hearing from the BoE they can move quickly to move their funds out of the pound. They have done it before.

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Remember the market expects US interest rates to continue rising at a 'measured pace' over the next few months, so these movements will already be priced into the exchange rate.

Generally, markets move when expectations change, not when those expectations come to pass (economists call this the 'Rational Expectations' model).

Ah yes, but do they 'Expect' UK interest rates to rise with them? That's the question.

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Guest consa

I think you have mistaken a $ strengthening story (to be expected when raising rates) for a £ weakness story.

"To be expected" this is normally the case but other factors are at work now, like asian countries diversifying their support of the dollar from $ to Euros and other currencies, this will put downward pressure on the $.

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Ah yes, but do they 'Expect' UK interest rates to rise with them? That's the question.

I think this table reveals what current market expectations are for interest rates over the coming months.

Basically, UK interest rates are expected to remain steady over the coming months with a slight risk to the upside.

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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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