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The pound seems to be riding the Euro's coattails.

Does this mean less pressure on Britain to raise its own interest rates?

I'm depressed. I need an HPC in Britain and a stronger dollar to purchase in England. :(

Dollar hit by rate differential fears

By Leslie Wines, MarketWatch

Last Update: 2:54 PM ET Jan 23, 2006

NEW YORK (MarketWatch) - The dollar was under pressure Monday afternoon, after new speeches from Federal Reserve and European Central Bank officials suggested that the difference between U.S. and euro-zone rates could shrink this year.

Sentiment was further dented by complex international developments, including Iran's nuclear strategy, Russia's debt repayment plans and Canada's elections Monday.

The euro, trading just below a four-month high, rose 1.4% to $1.2299 as the dollar shrank almost 1% to 114.492 yen.

In intraday action the euro managed to briefly bolt above $.123, a level not seen since mid-September, 2004. Some analysts believe the euro in the next few weeks will run up to the $1.25 to $1.26 level. See full story.

"We would have to say there is a confluence of events conspiring against the dollar," said Michael Woolfolk, a senior currency analyst at The Bank of New York.

Woolfolk said the biggest factor weighing on the dollar are new remarks by central bankers that suggest the European Central Bank might become more aggressive on raising rates this year, even as the Fed winds up its cycle of rate increases.

St. Louis Fed President William Poole earlier suggested that the market is anticipating a Fed rate increase on Jan. 31 with a 50% probability of another in March, and then not much beyond that.

Poole labeled it a reasonable assumption, "which is perhaps the closest any Fed officials have come to suggesting the peak on rates for now," said Steve Barrow, chief currency strategist at Bear Stearns.

European Central Bank council member Christian Noyer earlier said euro-zone rates are low by historical standards and that the ECB will do everything necessary to maintain price stability, according to Action Economics.

Noyer's remarks fueled speculation the ECB may turn aggressive on rates this year.

ECB executive board member Lorenzo Bini Smaghi over the weekend clarified his policy stance, saying that he doesn't contend that interest rates must rise. Rather, he said, he believes the ECB must act in response to data on a month-by-month basis.

The dollar also was hurt by new remarks made Monday in London by New York Fed President Timothy Geithner. He indicated that monetary policy can't reduce the financial imbalance created by the twin deficits, said Action Economics.

The dollar fell 0.08% against its Canadian counterpart to C$1.1491, as the market awaited news of Canada's parliamentary elections. Last week, the Canadian dollar rallied on hopes that the pro-business Conservative Party will attain a majority.

But ABN Amro said in a research note Monday that investors and traders should be on the alert for possible negative comments on the Canadian currency from Conservative leader....

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It's been perplexing me this one because I can't exactly say I'm a Sterling bull, but I'll go with the trend. The one word of caution I have is watch out for the MPC minutes this month (25th). Should be a very good hint at what's to come, very tempting to start shorting on Wednesday morning.

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You are mad to hold any USD$, keep any debt in USD$ as it will be easy to pay back later as it's about to take one hell of a beating

See PetraDollars and then work out what's coming.

Take note about ford and what europe is saying.

Best luck

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If Europe raises rates the UK will follow and house price falls will be sharper. If Europe does not raise rates and the UK follows, the Euro and pound fall making it cheaper to buy houses with US $. Either way if you hold US $ you win!

BTW, do not estimate the resilience of the US $ when things get rough around the world. The Asian markets are tied to the US $ whether they like it or not because a falling dollar is bad for business and bad for their currency reserves.

The UK has rapidly rising imbalances similar to the US with an out of control money supply and deficit--the evil twins. Unemployment rates are picking up speed and there is really not much holding the pound up other than house prices. The US has a similar problem but it is more regional and confined to ther coastal bubbles which should pop anytime now.

Edited by Realistbear

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If Europe raises rates the UK will follow and house price falls will be sharper. If Europe does not raise rates and the UK follows, the Euro and pound fall making it cheaper to buy houses with US $. Either way if you hold US $ you win!

You having a joke :lol:

So if as many say the USD$ tanks, Bang, Crash it drags the GB£ with it and the euro is worth more than gold.

Bet your glad you held you $$$$ over the past few years :lol:

bad for their currency reserves

So like the rest of the world they get rid now or are left holding worthless paper

Did you not type "PetraDollar" into google before saying the above.

Edited by Justice

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Did you not type "PetraDollar" into google before saying the above.

Did you not type "PetraDollar" into Google before saying the above?

(Hint: Google says "Did you mean to search for: petrodollar".)

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You having a joke :lol:

So if as many say the USD$ tanks, Bang, Crash it drags the GB£ with it and the euro is worth more than gold.

But why isn't that happening now? The pound is gaining strength along with the euro against the dollar this week.

It seems to me that the pound is simply riding the coattails of the euro. That leads me to think that the markets believe Britain will raise interest rates, too. Otherwise, why would the pound be gaining along with the euro?

I guess I can't have my cake and eat it, too. If Britain raises interest rates, then the pound won't fall back down to its historic average of around $1.60. A strong pound is not good for me, because it increases the cost of my house purchase in England.

But, a raise in interest rates will help along the HPC. So that is good.

I'd like both to happen, of course--a falling pound and an HPC. Not going to happen, it seems. :(

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But why isn't that happening now? The pound is gaining strength along with the euro against the dollar this week.

It seems to me that the pound is simply riding the coattails of the euro. That leads me to think that the markets believe Britain will raise interest rates, too. Otherwise, why would the pound be gaining along with the euro?

I guess I can't have my cake and eat it, too. If Britain raises interest rates, then the pound won't fall back down to its historic average of around $1.60. A strong pound is not good for me, because it increases the cost of my house purchase in England.

But, a raise in interest rates will help along the HPC. So that is good.

I'd like both to happen, of course--a falling pound and an HPC. Not going to happen, it seems. :(

I am counting on a triple whammy: HPC, falling pound and rising dollar. All are on the cards as HPC is a given and if UK IR rise the HPC will be particularly vicious and outdo anything that has gone before. If UK IR fall then the pound tanks against all currencies. I think the pound is possibly the worst currency to hold as its in a no win situation and has been riding high solely on the basis of HPI which is past.

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Just two points:

1) I think what we've seen over the last two days is an inherent weakness of the dollar against all currencies, and I would not interprete it as strength of the pound.

2) Reports from abroad on the UK economy might not have the detailed knowledge that abounds on here. There is a lot of hype in the UK media on the impending upturn of the housing market, and that sentiment might be largely shared abroad.

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Just two points:

1) I think what we've seen over the last two days is an inherent weakness of the dollar against all currencies, and I would not interprete it as strength of the pound.

2) Reports from abroad on the UK economy might not have the detailed knowledge that abounds on here. There is a lot of hype in the UK media on the impending upturn of the housing market, and that sentiment might be largely shared abroad.

Very true, Gordon's economic miracle is still being believed in the US it seems (as evidenced by the soaring pound) and the BBC's spin appears to be keeping the truth obscured for now at least. When overseas markets see that the miracle economy has turned into an economy built on HPI sand and shifting down the black hole there could well be another re-adjustment of the pound to reflect reality.

Here is a fine example of BBC spin with a glaring contradiction built in:

http://news.bbc.co.uk/1/hi/business/4643168.stm

"And UK manufacturers cut about 25,000 jobs in the quarter as they struggled to pass on rising costs to customers."
"However, it is not all gloom, as manufacturers remain confident that they will be able to pass on rising costs in price rises to the domestic market this year."

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http://uk.biz.yahoo.com/060124/94/g204e.html

Dollar stabilises after sharp sell-off

The under-fire US dollar remained near recent lows in European morning trade on Tuesday, but appeared to be stabilising amid a view that Monday’s sharp sell-off may have been overdone.

The dollar fell by more than 1 per cent to four-month lows against “safe haven” currencies such as the Swiss franc and euro on Monday amid a rise in global risk aversion amid a pick-up in geopolitical tension, as well as a perception that the gulf between US and eurozone interest rates may start to narrow later this year.

Worries over the ballooning US current account deficit, a major cause of the dollar’s three-year slide to 2004, also returned to the fore having been largely ignored for most of the past year.

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http://uk.biz.yahoo.com/060124/94/g204e.html

Dollar stabilises after sharp sell-off

The under-fire US dollar remained near recent lows in European morning trade on Tuesday, but appeared to be stabilising amid a view that Monday’s sharp sell-off may have been overdone.

The dollar fell by more than 1 per cent to four-month lows against “safe haven” currencies such as the Swiss franc and euro on Monday amid a rise in global risk aversion amid a pick-up in geopolitical tension, as well as a perception that the gulf between US and eurozone interest rates may start to narrow later this year.

Worries over the ballooning US current account deficit, a major cause of the dollar’s three-year slide to 2004, also returned to the fore having been largely ignored for most of the past year.

The markets may also be considering Gordon Brown's miracle economy's deficit also--the worst since 1984 and growing. When the US catches a cold. . . . .

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If you read the FOREX articles it seems that there is a lot of confusion. No one seems to know where to put all that money sloshing around. If it goes into Euros the spectre of German unemployment and French stagnation is a put off. The pound looks overbought given the growth in the twin deficits (no one knows about the unemployment growth yet-ssshhh). The dollar is vulnerable because of the ongoing deficits.

It is a given that there will be a HPC in the US this year. That may cause rates to stop abruptly and this could jeopordize the dollar. However, if England follows suit this year also then the money is going to either go into Euros or stay with dollars. But its all a lot of ifs and buts which is why I am not moving one way or the other. Mt STR happens to be in US $ and I am getting 4.07% return with another two hikes in the pipeline which will take the savings rate to about 4.5%.

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ok here's my scenario....the US$ will NOT tank...yet!!!!

yes there will be a bit more weakness for a couple of years,but dollar will not tank..yet.

give the extra war debts from iran '06 a few years to filter down,and THEN it will tank...the defecit they have now will look quite small once you add in another 100bn or so for warfare/reconstruction.

.....and that will probably tip it over the edge as boomers start taking from the system.....I spy a major default a few years away...with the eurozone actually snatching the goodies once people realise.

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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% +
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      • Even
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      • up 5%



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