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Bingley Bloke

Short Sterling Question

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Short sterling futures are the market's projection of three month interest rates. Futures prices rise as interest rate expectations fall which itself would also apply downward pressure to the pound. However, there is no explicit link between short sterling futures and the pound.

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Short Sterling = is traded on the London International Finnancial Futures and options Exchange (now Euronext.LIFFE exchange L ) under the sybmbol LFL.

in laymans terms short sterling is the cost of money in pounds over a short term (as Spoon says) 3months which is settled against the 3month LIBOR rate, the liquid contracts are the quarterlies Jun06 Sep06 Dec06 Jan07 etc. other important STIR futures are of course Euribor the euro equivalent traded on Euronext.Liffe as LFI and the Eurodollar (the dollar equivalent) traded predominantly on the Chicago Merchantile Exchange (CME). there are also the Euroswiss and Euroyen (TIBOR).

The Eurodollar is the most liquid exchange traded contract in the world. and in general the money transacted through STIRs each is massive. The CME do 1.8million lots a day where each lot is 1 million USD so thats 1.8 trillion dollars every trading day of the year.

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So how would one short sell the pound, if not by buying short sterling? How did George Soros and his mates do it?

You could use a product such as http://uk.warrants.com/services/quotes/sea...peul=Currencies

but this only allows you to short directly against the Euro or $ - and these warrants are, reportedly, not popular with professional investors, however they do allow you to gear up and let £1,000 do the work of £20,000 or £30,000.

A question of my own - I'd prefer to short £ against the Yen. What product/strategy would be best?

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Thanks, that's interesting. I was just wondering for future reference. If I was so rich that I could move the pound on my own I wouldn't need to! My interest is, of course, seeing interest rates rise so property falls and then I can afford a house, so I was more interested in which indicators to watch to see what pressures are being applied to which parts of the financial speectrum than actually being directly involved.

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So how would one short sell the pound, if not by buying short sterling? How did George Soros and his mates do it?

You'd short GDP/USD or whatever given pair on the forex markets, Soros sold the pound and bought DM (?) and then settled the trade once the pound had tanked, thus pocketing the difference... which was undoubtedly leveraged to hell and back.

Short sterling is just interest rate futures, it's only related to forex in as much as rates affect fundamentals and capital in flows, for example the June contract for short sterling is currently trading at 95.34 (100 - 95.34 = 4.66%). It obviously changes on the BoE outlook, as does GDP on forex, so they're interlinked in that sense.

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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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