GBP Getting a Hammering - What is Your View as to Why?

[NVP]

Euro relative strength against sterling only won out from the end of last year. It's not so much sterling weakening as the euro strengthening. Euro has come up from the bottom of the pack in July last year to take the lead just 4 weeks ago. Perhaps your question would then more possibly be 'Why is the Euro getting pumped?'.

My earlier response stands as a fundamental analysis of why the UK economy will continue to weaken and while GBP will be subject to continual raids on its value. Some will be speculative and short term, others will be persistent and quite deliberate.

(see attached diagram covering April/12 to current)

While it's true from a technical perspective sterling is only stronger than the Yen at present, it is still trading in a narrow range along with the rest of the pack.


Relative Strength of Majors

Light Blue = Euro
White = Kiwi
Indigo = Swissy
Yellow US Dollar
Orange = Aussie
Gray = Loonie
Green = Sterling
Red = Yen

looks familiar.......not my work though

 

[WR1]

The GBPs wkly support is / was 152.00
Monthly 1.25 - so for all those in the UK lets hope it does nt get there

definitions of a downtrend likely vary from trader to trader - and only common in that they make lower lows

can't really say exactly the method i use though - but not fractals - P.A these days is too fast for alot of the old methods and usually reverses when the old methods trigger for obvious reasons
but what ever works, should be used (imo)

Soros has just closed his shorts on the Yen and GBP - making 1 billion - but says hes thinking of re-opening GBP, not sure about his yen short

seems they are all in it together

GL

 

[Trader333]

lowest relative to what ?

Relative to the lowest point it has been in the last 52 weeks and since then it has done as expected and crashed through this level.

 

[counter_violent]

The job of the speculators in the markets is to continually probe for weakness. Get enough of them probing at the same time and it may trigger and sustain the directional move.

It's also not surprising that what we have seen is a shifting around of this probing and speculation since 2008 and no shortage of targets to probe.

 

[neil324]

Carney will make a switch to nominal GDP almost immediately. There's something to be said for making things look a little rosier right from the off.

Switch? the BOE has been doing it for 5 years.

 

[timsk]

I'm not sure this is entirely relevant to the thread, but I think this MarketWatch article is interesting, not least because it outlines why sterling is likely to get much more of a hammering in the future . . .
U.K. is sprinting towards junk bond status by Matthew Lynn.
Tim.

 

[Lax_Van_Dumb]

The GBP is almost at the lowest point it has been for the last 52 weeks and in my view will probably crash through the base and continue going down. What are your views on why this is happening and the likely future scenario ?

The GBP will fall until it is at a price that the institutions want to buy it at. Ringpiece your stabbing guesswork about credit ratings, exports, Nick Clegg sex allegations and prince harry. My assessment is the only correct one.:smart::smart::smart::smart::smart::smart::smart::smart::smart::smart::smart::smart::smart::smart::smart::smart::smart::smart:
Not to mention the horsemeat , but there again we don't export much in the way of "beef".

 

[Predicabo]

Switch? the BOE has been doing it for 5 years.

BoE's Weale says does not favour nominal GDP target switch | Reuters

 

[neil324]

BoE's Weale says does not favour nominal GDP target switch | Reuters

He's talking out of his ass.

Inflation has been 'over' target for about 38 of the last 42 months. 160% over at times.

Imagine trading with that success rate. You'd be fooked quicker than a.....

 

[neil324]

I'm not sure this is entirely relevant to the thread, but I think this MarketWatch article is interesting, not least because it outlines why sterling is likely to get much more of a hammering in the future . . .
U.K. is sprinting towards junk bond status by Matthew Lynn.
Tim.

Yep the fundamentals are shocking, very very shocking.

I think the policy with the coalition has been to generate inflation in the hope wages spiral. In the mean time the government carry on spending, while pretending to cut so not to put a drag on GDP or spook the markets.

This isn't the 70's. Globalization, the unions being smashed in the 80's and peoples fears over their jobs means wage inflation isn't going to happen. The cost push inflation is reducing consumers disposable incomes thus affecting the service economy, which is 70% of GDP. Things will spiral.

How it unfolds and over what time frame is open to debate. But the UK is in for some serious problems akin to what Greece is experiencing.

It's either hard or soft default. The currency will crash and the country hyper inflate with the BOE full throttle with QE.

 

[Trader333]

High inflation erodes debt and as the UK has the equivalent of £30K of debt for every person in the country it is easy to see why they would want high inflation in my view. I doubt people on the street even begin to grasp just how serious this is.

 

[neil324]

High inflation erodes debt and as the UK has the equivalent of £30K of debt for every person in the country it is easy to see why they would want high inflation in my view. I doubt people on the street even begin to grasp just how serious this is.

Government debt maybe.

Wage inflation erodes personal debt.

They are generating cost push inflation minus the wage inflation compounding the situation.

 

[Predicabo]

He's talking out of his ass.

Inflation has been 'over' target for about 38 of the last 42 months. 160% over at times.

Imagine trading with that success rate. You'd be fooked quicker than a.....

My point was to refute your previous comment. The BoE has not been using nominal GDP as a target, but inflation as set by the government. The likely switch to nominal GDP rather than inflation will be quite new. Even newer will be the decision to allow the BoE to set that itself; moving from a position of operational independence to full independence. Long overdue.

 

[Lax_Van_Dumb]

What is the role of the British Pound? We produce next to Fark all, we are almost self sufficient in terms of energy and food. The GBP is more of a facilitation currency in the financial services sector and that means its overall value is pegged to whatever the banks want it to be. Forget trying to second guess the markets and ignore the BOE wannabe spokespersons. Focus on the institutional moves then when the tide turns take a long position. It is not rocket science.I was at an expo 2 years ago where an "expert panel" were predicting with force that the EUR was going to be dead in 2013. I did not believe them then just like I refuse to believe the "experts" on here now.

PS European culture isn't what it used to be.

 

[neil324]

My point was to refute your previous comment. The BoE has not been using nominal GDP as a target, but inflation as set by the government. The likely switch to nominal GDP rather than inflation will be quite new. Even newer will be the decision to allow the BoE to set that itself; moving from a position of operational independence to full independence. Long overdue.

I understood your point, hence my presentation of the facts off their achievement of not hitting the given target or even coming close on an extremely high percentage of the times since late 2008.

So in effect have been nominally targeting GDP 'un-officially' since late 2008.

 

[NVP]

The GBP is almost at the lowest point it has been for the last 52 weeks and in my view will probably crash through the base and continue going down. What are your views on why this is happening and the likely future scenario ?

because people are selling it ? .......

(sorry - couldnt resist)
N

 

[Trader333]

because people are selling it ? .......

Actually that is not a reason in my view, it is lack of buying support which is not the same. A lack of buying support can see any instrument collapse in price and sometimes with almost no selling. Conversely, sometimes there can be huge selling and prices don't decline.

 

[NVP]

Actually that is not a reason in my view, it is lack of buying support which is not the same. A lack of buying support can see any instrument collapse in price and sometimes with almost no selling. Conversely, sometimes there can be huge selling and prices don't decline.

so the GBP is losing value against most other G8's at the moment and people are not selecting it as the sell currency in their pair selection.........

interesting theory T........
N

 

[Trader333]

What I was trying to get across is that instrument price decline is more to do with lacking of buying support than people selling. There are good examples of this where the volume of selling can be enormous and yet price has not declined and other cases where volume is very low and yet price collapses.

 

[cablemonster]

What I was trying to get across is that instrument price decline is more to do with lacking of buying support than people selling. There are good examples of this where the volume of selling can be enormous and yet price has not declined and other cases where volume is very low and yet price collapses.

I hear what you are saying, it's simple supply and demand at work. Very few participants want to step up and go long the pound at present hence it doesn't take many sellers to consume the buyers liquidity.

This plays out in extreme example like the flash crash where many automated trading systems were turned off removing liquidity, the market could not find a bid as the handles plummeted. Price was falling fast on little volume.

To a certain extent I think the consuming and lack of opposing liquidity is a positive feedback loop.

The technical signs in the market were for more bearish moves in the last week and it is strange how the news flow often comes out in support of the technical signs. The GDP data miss on Friday was an example of this and we were down 100 pips shortly after the news broke.