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There May Be Trouble Ahead ( For The Pound)

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Uberbull David Smith of the Sunday Times, who has been consistently saying that rates will be cut again and again since last year, has finally realised and acknowledged that they may well have to rise instead.

http://www.timesonline.co.uk/article/0,,2097-2103316,00.html

I think he must have been reading HPC because the case that has been consistently argued here is the one he presents – he even uses the same charts I have seen on here showing US v UK interest rates !. Basically as US rates go above UK rates investors take their funds out of the UK and put them in to the U.S, and why wouldn’t they – I might even do the same myself. Consequently as the pound is sold it drops , possibly sharply thus pushing up the cost of imports and thereby inflation – so UK left with no choice but to hike rates at a time when the UK economy looks in need ( David Smiths opinion) of a cut to stave off recession.

He acknowledges that rates in the US may well go to 5.5% or above potentially leaving a huge gap with the UK – unsustainable as history shows. He also acknowledges that global pressure on rates is up not least because the Japanese are ‘preparing the ground for a rise’.

Somewhere else in the paper it is mentioned that inflation in the US is picking up, in part because of inflation in the Far East – the one thing that has kept inflation low is starting to rise – and guess what raising our interest rates will make no difference !. So what is going to happen when inflation from the Far East adds to our own inflation ( mostly in the service sector – I believe currently running at about 4-5% ?) - looks like those storm clouds are gathering or should I say the storm clouds are clearing and we can see blue skys ahead for HPCers !

Should be an interesting week – wonder what the Nationwide figures will show.

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If you want to buy the petradollar then feel free but my guess is the UDS$ is going to crash and drag the UK with it.

Iran wants to sell oil in Euros and thats fine with europe

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Guest consa
You should never ask a question without knowing the answer but this was a tough one. I'll ponder for a little longer.
:blink:

Isn't this what he has done?, that is what I mean in my last post

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To quote the article:

This week American interest rates will be hiked to 4.75% — more than UK base rate for the first time since the 1980s.

This is incorrect. The federal funds rate was higher than the BoE base rate for most of 2000. The Fed rate was 6.5 % and the BoE rate was 6%.

http://www.houseweb.co.uk/house/market/graph.html

http://www.msnbc.msn.com/id/9884272/

Incidentally, 2000 was a year when the pound lost a lot of value against the dollar.

http://www.gtnews.com/article/5258/pic1.gif

frugalista

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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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