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Pound At New Highs

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I used to believe people on here when they said that as the US raised interest rates there would be a run on the pound fueling inflation, etc

The pound is nearly back up to its historical highs of $1.90 if anything thats going to reduce inflation on imported products therefore keeping our general inflation low and allow the BOE to hold off on raising interest rates.

So what did you all get wrong then?

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I used to believe people on here when they said that as the US raised interest rates there would be a run on the pound fueling inflation, etc

The pound is nearly back up to its historical highs of $1.90 if anything thats going to reduce inflation on imported products therefore keeping our general inflation low and allow the BOE to hold off on raising interest rates.

So what did you all get wrong then?

I think that those who predicted a run on the pound were not counting on the dollar weakness.

£ vs $ may be raising... but the £ can also come under pressure relative to other currencies. have you checked what the £ is doing relative to the Euro??

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The pound is strong because the markets are now convinced the we are going to raise rates in the UK and because the markets believe the US has stopped too soon. It doesn't help that Bernanke is sending out confusing signals as to how much further US rates will go.

Also US trade deficit is a big concern.

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It's not GBP which has risen, but the US$ which is tanking - hence the strong rise in gold prices.

Against the Euro the GBP has only risen a small amount.

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It's not GBP which has risen, but the US$ which is tanking - hence the strong rise in gold prices.

Against the Euro the GBP has only risen a small amount.

Yes - but it has risen, not fallen over the last couple of weeks. When the US rate went over the UK rate there were a lot of predictions here of the £ falling against the $ - then when it didn't a common fall-back position was that it was only because of the weak dollar, and actually the £ was falling against the Euro. It did fall very slightly but now it's risen by more.

I think it shows the difficulty of predicting currency movements - and it's still hard at this point to see what will happen next.

To be honest I would much prefer the £ to fall back to 1.60 or 1.70. I buy and sell in $ but I sell far more, so the weak dollar is reducing the profit levels on my budget. Sadly I think that whatever the £ does the $ may have further to fall yet. I wouldn't make any predictions but I'm having to start to look at forward projections based on the rate at well over $2 so I can plan how to deal with it.

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Yes - but it has risen, not fallen over the last couple of weeks. When the US rate went over the UK rate there were a lot of predictions here of the £ falling against the $ - then when it didn't a common fall-back position was that it was only because of the weak dollar, and actually the £ was falling against the Euro. It did fall very slightly but now it's risen by more.

I think it shows the difficulty of predicting currency movements - and it's still hard at this point to see what will happen next.

To be honest I would much prefer the £ to fall back to 1.60 or 1.70. I buy and sell in $ but I sell far more, so the weak dollar is reducing the profit levels on my budget. Sadly I think that whatever the £ does the $ may have further to fall yet. I wouldn't make any predictions but I'm having to start to look at forward projections based on the rate at well over $2 so I can plan how to deal with it.

Last time the $ / £ rate inverted from the norm the pound held up for sometime before quite a harsh correction, so this is not that unusal.

This time, I think, Oil is the driver. Look at the main currancies. All are worse off than the UK with regards to dependency on Oil imports. This situation may not last for much longer, but it is still currently true. The pound has, over the last year or so, responded to strong movements, up and down, in the price of oil.

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I believe the market is factoring in impending rates rises, but I could be wrong. Hopefully someone who can explain properly will arrive in a moment!

I think the market is expecting a 0.25% rise later this year. I wonder if the UK vs US IR rates is going to be so crucial though. The traditional explanation for the way it works is that if the US rates are higher than the UK rates there will be high capital flows out of sterling into the dollar, and that the UK rate has to be higher to counter this.

But I don't think at this exact moment of history that people really trust the dollar in the way they did in the past. A shaky dollar might mean that sterling can cope with a slight disparity the "wrong way round". If US rates keep rising then things might change, but I think this is a case where people are assuming past patterns will recur, without taking into account other changes in the international environment.

This time, I think, Oil is the driver. Look at the main currancies. All are worse off than the UK with regards to dependency on Oil imports. This situation may not last for much longer, but it is still currently true. The pound has, over the last year or so, responded to strong movements, up and down, in the price of oil.

That's an interesting point - I'll keep an eye on that.

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I think what we're seeing here is a typical market mentality confidence issue.

Bascially even though some people were expecting a run on Stirling because confidence in the dollar and some otehr currencies has dropped through the floor the value of the pound as a 'safe' currency has risen.

Being honest if the Fed had any intention of restoring any kind of confidence then they would still be releasign the M3 monetary figures.

- Pye

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Guest Charlie The Tramp
Money Morning

The plummeting pound

Sterling might have gained 10 cents versus the dollar in the last two weeks, but in the bigger scheme of things – the really big picture – its value has vanished to almost nothing.

“Relative to 1930, a pound in 2005 was worth around 2.3 decimal pence,” says a new research paper from the House of Commons. “One (decimal) penny in 1750 would have had greater purchasing power than a pound in 2005.” And the Government says inflation’s dead!

Pound At New Highs

Whatever happenned to the run on the pound?

bp_120506.gif

post-335-1147507704.gif

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bp_120506.gif

That's a very interesting graph CTT.

What I see when I look at it is periods of inflation followed by periods of deflation. The 20th century seemed to be more successful at deflating the currency, but the period around the 1930's shows the most recent period of currency inflation/asset & goods deflation.

It is widely understood that asset & goods deflation is the enemy, so that graph says to me that economies have run rather well in the 20th century compared with prior times.

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WAKE UP!!! It's not just a run on the pound. It's a run on ALL paper currencies, including the Swiss Franc. All of them are being debased at an alarming rate against gold, with the US dollar leading the way down.

1a-cad-usd-jpy-euro-gbp-chf-6m-Large.gif

And did you exchange

a walk-on part in the war

for a lead role in a cage...

Pink Floyd - Wish you were here

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Guest

So is now the time to buy dollars ?

You mean "borrow?" To buy some gold. ;)

Edited by megaflop

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So is now the time to buy dollars ?

I do think that Dollar sentiment is getting a little too bearish at the moment (short term) and also speculators seem to have become overly involved in the commodities markets. So a decent Dollar rally is the most likely next major move IMO followed by the real plunge (in 2007) that many are predicting. Not a plunge into oblivion, but a plunge nonetheless.

Just my best guess at this stage. I could be wrong. Do your own research before investing on this basis etc.

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Guest Charlie The Tramp

That's a very interesting graph CTT.

What I see when I look at it is periods of inflation followed by periods of deflation. The 20th century seemed to be more successful at deflating the currency, but the period around the 1930's shows the most recent period of currency inflation/asset & goods deflation.

It is widely understood that asset & goods deflation is the enemy, so that graph says to me that economies have run rather well in the 20th century compared with prior times.

If we go back to 1750 a pound at that time is equivalent in money terms to £143 today. The difference is you could probably have bought a house for £143 in 1750 :rolleyes: .

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It is widely understood that asset & goods deflation is the enemy

Only to people who've bet their financial existence on inflation. For the rest of the population deflation is a good thing, because it improves their standard of living.

Or are you going to tell us that you'd rather the computer you're using had cost you tens of billions of pounds because there'd been no deflation of IT prices?

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This weekends Wall Street Journal might provide a clue:

The White House is quietly acquiescing in the dollar's recent slide in hopes of further narrowing the $62 billion U.S. trade deficit. China's robust trade surplus and mild inflation signal tighter monetary policy is likely.

The reasoning is that a weeker Dollar should improve the US trade deficit as it makes imports more expensive and exports cheaper. So the US may be happy to deflate its way out of debt.

This is a risky strategy as it is potentially inflationary, leading to further interest rate rises.

Regards

BP

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I am a bit of a layman on these things

But surely if the pound increases in Value, then our pound buys more imports, but makes our exports more expensive.

Surely that is inflationary, and would be avoided at all costs. I seem to remember a favourite trick of Labour Parties was to devalue the pound, would this remain an option today ?.

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I used to believe people on here when they said that as the US raised interest rates there would be a run on the pound fueling inflation, etc

The pound is nearly back up to its historical highs of $1.90 if anything thats going to reduce inflation on imported products therefore keeping our general inflation low and allow the BOE to hold off on raising interest rates.

So what did you all get wrong then?

the markets react long before the event - the run on the pound was nearly a year ago, as US rates were rising - the majors are up vs the $ in advance of rises in their rates - institutions aren't holding sterling in the expectation of IRs staying the same

and if you'd listened when i said that cable had gone through 1.76, you might have made a lot of money

so really, the answer is we didn't get anything wrong, just you and a few BTLs who have

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Or maybe euros. ;)

or maybe not.

Heres one for all those shitty little BNP suporters - Sterling is a marginal currency.

Its an island off of Europe with its own currency.

Its nice. Its quaint. But its ******ed.

The right always rise in times of economic distress.

Many young Englishmen men lost their lives fighting against these people only 60 years ago.

They were the true patriots, not these ******in oiks.

Be careful who you vote for - dont let panic and the herd mentality lead you into the hands of these people.

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Hell if that was a meant to scare people off from voting BNP for me it had the opposite effect.

I am fast believing that it is mainstream politics that is now extremist, BNP are a walk in the park compared to the news coming out of Number 10 over the past few months.

WMD's

Sleaze by the bucket load, not monthly now daily

Corruption selling ID's in the Civil Service

OAP's having sex with Secretarys in public offices

What next!!! Nothing would shock me now.

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I used to believe people on here when they said that as the US raised interest rates there would be a run on the pound fueling inflation, etc

The pound is nearly back up to its historical highs of $1.90 if anything thats going to reduce inflation on imported products therefore keeping our general inflation low and allow the BOE to hold off on raising interest rates.

So what did you all get wrong then?

Look at short sterling, the market has already priced in a couple of BoE rises.

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  • 339 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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