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bryanh

Boe Ir Rise, Pound Falls

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The GBP fell today against most of the major currencies

http://newsvote.bbc.co.uk/1/shared/fds/hi/...ncy/default.stm

The GBP should have gone up with the IR rise, WTF is going on ?

it did briefly and cable touched 2.02 but strength was sold as the hike was priced already (or the economic data excuse) there are record long positions in sterling at the moment, it's prime for a correction imo, the sterling reversal was across the board not just cable

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Buy the rumour sell the news ;)

Hmmm... Someone's been reading my post from earlier... <_<

As for cable: Its worth keeping in mind that fundementals are generally less important than technicals - this is as true for FX as any market. Admittedly this isn't entirely without exception (The very fact that the carry trade exists is evidence of that), and it would be foolish to ignore the fundementals altogether, but some of the largest moves in the markets are generated on technicals.

The moral of the story is: don't read too much into movements around the news...

For those who are really interested: cable bounced off the 15-Min upper bollinger as a result of the spike at 1100GMT (BoE IR Announced), this triggered a profit take and positions were paired off, hence the fall. Since then it's bounced on the lower bollinger and is now within 20 pips of its pre-BoE annoucement price.

For those who aren't interested: Pipe smoking bishop lights up in police station. Jeez.

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http://uk.biz.yahoo.com/06072007/214/fx-ro...ound-slips.html

Market News
Friday July 6, 07:00 AM
FX round-up
: Pound slips back
LONDON (ShareCast) - Sterling eased away from its recent 26-year high Thursday, although the Bank of England talked of ongoing inflation risks as it raised interest rates by a quarter point, as expected...../
There was good news for the dollar though as the Institute for Supply Management's services index rose unexpectedly in June to 60.7 from 59.7 in May, the highest read for over a year.
It was the second month in a row that the data has beaten forecasts, with anything over 50 indicating growth.

IMO the US and Japan have been working in concert to over-value the Euro & Pound to gain competitive advantage. The US economy, apart from housing, has been assisted by the low dollar and the positive impact on exports. Given that currencies are mostly cyclical in nature the market may be signalling an immanent end to the ascendancy of sterling. Normally, a hint by the BoE of even more hikes to come would have sent the pound up, not down.

With the sub-prime woes spreading globally and to the UK in particular (we face massive numbers of "resets" in September which many feel will trigger a panic sell-off as reposessions go into overdrive) the downside risks for sterling are building. The traders have been consistent in their comments that as goes HPI so goes the pound.

The bottom line: The news is becoming gloomier and gloomier by the day for house prices and the currency market may simply be waiting for the point at which they feel they have milked the currency long enough and that the downside risks in devaluation are higher than the upside risks for further appreciation on the back of a negative (house price INFLATION and all that goes with that) that requires ever higher IR and ever higher risks for property prices. Hobson's choice?

Edited by Realistbear

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And today the inverse is true:

Good news for US economy, cable rises.

Fundementals are (of course) important, but there are three other more important things that cause markets to move:

Technicals, technicals, technicals.

See my attached graph. The initial tram lines were drawn on earlier this year. (The more recently amended upper line has potential at the moment for a bounce, but it could just as easily break through, and I'm monitoring the situation)

Those of you who spotted this technical condition went a highly leveraged long on cable 3/4 weeks ago - and are now taking their wives out for steak dinners and buying GSXR-600s for themselves. Of course this is just one of many indicators that can/should/are used and, of course, this is just one timeframe - no trader in their right mind only checks just one.

Should anyone doubt the validity of this - here are the scores:

BoE IR announcement: <60 pip gain (wiped out shortly after)

Davros's technical bounce #106: >500 pips (and still very much alive - though at this point pairing off the position looks sensible)

weekly.JPG

post-2336-1183732569_thumb.jpg

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And today the inverse is true:

Good news for US economy, cable rises.

Fundementals are (of course) important, but there are three other more important things that cause markets to move:

Technicals, technicals, technicals.

See my attached graph. The initial tram lines were drawn on earlier this year. (The more recently amended upper line has potential at the moment for a bounce, but it could just as easily break through, and I'm monitoring the situation)

Those of you who spotted this technical condition went a highly leveraged long on cable 3/4 weeks ago - and are now taking their wives out for steak dinners and buying GSXR-600s for themselves. Of course this is just one of many indicators that can/should/are used and, of course, this is just one timeframe - no trader in their right mind only checks just one.

Should anyone doubt the validity of this - here are the scores:

BoE IR announcement: <60 pip gain (wiped out shortly after)

Davros's technical bounce #106: >500 pips (and still very much alive - though at this point pairing off the position looks sensible)

I thought that Sterling was down again today until a member of the Fed gave a speech in the US effectively acknowledging that IRs in the US weren't going to move any time soon which removed the speculation that there might be a further increase in rates in the US.

I could be wrong of course...

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talk of a dollar collapse in the near future is clearly nonsense since it has already crashed from 1.6 to 2.0 dollars to the pound. A 20% fall in anyones mind is a major correction and it's now clear that sterling is very overvalued wrt to the dollar. The reason it's so strong, and will probably get stronger, against the dollar is the house price bubble and rising interest rates. The question then is what happens when the economy slows down and interest rates are reduced - it's a double whammy against sterling which will fall relative to all currencies.

I agree with RB in that it looks to me like the foreign central banks have an agreement that allows the dollar to depreciate. It happened during the Vietnam war because the world knew the global economy was wholely dependent on the US markets. Of course, thats all changin' and it's a matter of time before Asias GDP and consumption start to overtake lazy ole' uncle sam. Why sell goods to a country that pays in dollars which are worth 5% less at the end of the year. Bretton Woods II is fast becoming an anachronism and we all know it - thats eveyone apart from Americans! Only then will we see a major correction, with the dollar gradually defalted as China and Russia take their sweet revenge for 6 decades of well meaning, but often arrogant, hegemony. Roosevelt was a great man and interestingly he hated Churchill who harked on to the notion that Britain should retain control over the colonies. The dark acts of British Empire didn't make it into my history lessons - did they yours? Amritsar and the spinning wheel revolution - and what of the Rothschilds and Bilderberg. Britains ruling class are a strange democracy despised by American theologens because they represent all that the founding fathers hated most - and who could blame them.

Of, course the BoE and GB will see this coming, so don't be surprised to see the Euro in your pockets before it happens. Thats if the ECB allow it. Personnaly, I think the UK deserves to be relegated to trading partner status since the average Brit still thinks of the UK as a colonial power and wont accept European Union is the better way.

Like most of the outpouring here it will be interesting to see how it turns out.

Edited by bpw

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I thought that Sterling was down again today until a member of the Fed gave a speech in the US effectively acknowledging that IRs in the US weren't going to move any time soon which removed the speculation that there might be a further increase in rates in the US.

I could be wrong of course...

The small spike for cable was caused by a news release, unemployment & NFP, which should be greenback positive. Previous speculation and hopes were that the fed might cut the rate. This news removed that hope. However despite this being news which would (sometimes) be expected to weigh on cable, today it caused the inverse. Mainly this is because cable overcorrected from a similar condition the day before. In all honesty this happens a lot as well. Put simply, cable, like every other currency, goes back to what it was doing before the news - if you take a 15min chart of cable then remove the time period of 1100GMT thursday to 1230GMT friday they join perfectly. I see this all the time, so it's no surprise. Remember, very few traders only use fundementals.

*edited for spelling mistake - duh!

Edited by davros

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The small spike for cable was caused by a news release, unemployment & NFP, which should be greenback positive. Previous speculation and hopes were that the fed might cut the rate. This news removed that hope. However despite this being news which would (sometimes) be expected to weigh on cable, today it caused the inverse. Mainly this is because cable overcorrected from a similar condition the day before. In all honesty this happens a lot as well. Put simply, cable, like every other currency, goes back to what it was doing before the news - if you take a 15min chart of cable then remove the time period of 1100GMT thursday to 1230GMT friday they join perfectly. I see this all the time, so it's no surprise. Remember, very few traders only use fundementals.

*edited for spelling mistake - duh!

My feeling is that Sterling is going to stay high against USD because China, Russia and Middle East countries are diversifying away from USD. That is a long term plan so I can't see much changing. Of more interest may be how Sterling performs against the Euro.

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My feeling is that Sterling is going to stay high against USD because China, Russia and Middle East countries are diversifying away from USD. That is a long term plan so I can't see much changing. Of more interest may be how Sterling performs against the Euro.

how does this work? Its only true if sterling is pegged against the Euro and to do so means interest rate increases if the Euro appreciates. Or am i wrong this is a key questions for HPC.

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it did briefly and cable touched 2.02 but strength was sold as the hike was priced already (or the economic data excuse) there are record long positions in sterling at the moment, it's prime for a correction imo, the sterling reversal was across the board not just cable

.....yes .....see 88/89 when it peaked against the USD.....just before the almighty GC1........

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