Thursday, August 14, 2008
David Bloom, the head of currency strategy at HSBC, warned that sterling was “going to hell in a handbag”, and expects it to end the year at $1.75.
Sterling's slide set to deepen, UK banks warn
Paul Robson of Royal Bank of Scotland: "I expect sterling to weaken against the euro over the next few weeks, perhaps to 80p as the Bank of England is set to lower interest rates before the ECB.
Posted by big chris @ 09:01 PM (1540 views)
3 thoughts on “David Bloom, the head of currency strategy at HSBC, warned that sterling was “going to hell in a handbag”, and expects it to end the year at $1.75.”
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stillthinking says:
This really is strange. On the one hand we have the much vaunted imported inflation, and we have traders holding the value of sterling up because maybe, maybe soon, King will raise interest rates and they want to be holding sterling when he does so.
Then, relatively out of the blue, he announces he won’t be raising interest rates. The traders accordingly sell sterling and place him in a position where he is under much -more- pressure to raise rates as import prices rise.
Everything, everything King says is part of his job and is to manipulate market opinion. So what reason would King have for lowering the value of sterling ?
For some reason he must be concerned about sterling being too high. My ideas are;
Perhaps if he lowers sterling then uk mortgage debt becomes cheaper for foreign funds to support.
Keeping interest rates too low encourages the borrowing we will need during a future deflationary phase.
Lower our trade deficit by making foreign goods too expensive to buy.
Maybe he feels that foreign prices are deflationary from now and he wants to compensate.
I don’t know. There is something very fishy going on here. The whole point of the monthly meetings is to keep interest rate setting current, not to announce, in advance, lowering or maintaining interest rates… Even the inflation chart you may have seen looked highly suspicious to me. Why would there be a sudden levelling, and then a sudden drop? These figures are obtained from thousands of samples, they wouldn’t suddenly act together, so the line should be relatively smooth. Admittedly there is the sudden credit crunch, but there are two dramatic realignments on the chart. What causes them ?
One way or another I can see sterling going to hell in a handbasket. Even in a deflationary environment, I can see wages going down faster than the prices of goods(also going down).
str 2007 says:
Which will go down faster though, the value of savings in sterling or house prices.
Cash is still King IMO. (and in the currency of where you plan to buy a house)
Just look at the price of Gold $798 as I type. That’s falling at about 8-10 times the speed of houses !
brian t says:
I’m not really buying the idea that Sterling will go down that far against the Euro, since the Eurozone has problems too. Both currencies have been too high against the dollar for too long, and I expect that to be partly reversed, but more so for Sterling than for the Euro.