Thursday, April 17, 2014
Time to short GBP/USD?
Rates rose last year so, apparently, everyone jumped on the short term bandwagon and decided that the multi-decade trend had suddenly changed. Somewhat prematurely in our view. So the rate rose last year and the media and City pundits went wild announcing the death of the 40 year fall in rates and so, they said, we must expect higher and higher rates in the future. I have news for you: if rates rise then the Western economy is Ã¢Â€Â“ to put it highly technically toast! So, if the rate at which the government borrows was to rise from, say, 3.5% to 4% Ã¢Â€Â“ a mere 0.5% rise Ã¢Â€Â“ this would increase the GovernmentÃ¢Â€Â™s interest bill by Ã‚Â£7 Billions pa. How would it pay for it? Ã‚Â£7Bns of cuts? That would play well with the electorate just as we are entering the final year before the next Election.