The pound has fallen a minimum of 25% against even the weakest of the other major currencies this year and in the same period our Manufacturing output has actually fallen.
...and the currency markets continue to hammer the pound this morning as the momentum of the move lower seems almost impossible to stop. EUR/GBP is at a new all time high of £0.9346-£0.9348 and everyone seems in a big hurry to get to £1.0000.
The precipitous move does of course add to the problems for the BOE who apparently did not want to cut rates further because of the impact on the currency. They still, even after all these years, do not seem to understand currency markets.
Traders will buy or sell currencies in anticipation of the next rate move not in reaction to the last (aside from the immediate aftermath of a decision). If the perception is that rates are going lower then a currency will be sold. Better to get the rate moves out of the way sooner rather than hang around and watch your currency get smashed up.
Pretty soon talk will turn to ECB rate cuts and we may well then see just as sharp a move against the Euro.
FX Spread Betting, 17 Dec 08
Currency markets added to the break out mentioned yesterday, helped it must be said by the rate cut. Sterling is now more than 11¢ above the lows of last week and the cross has now moved over the high of the previous rally, $1.5535.
As mentioned, the traders currently under pressure are the weak sterling shorts who got into the game late (on the back of some rather exuberant press and analyst forecasts). While the pound may well hit parity versus the dollar at some point it is current the GBP / USD sellers who are feeling the pain and being forced into position covering.
Conversely the Euro continues to strengthen against all comers and the pressure remains for the moment on its favour. When minds turn to the ECB response to the Fed and the BOE cuts this may reverse. For the time being, unless you already have a position, it would be wise to sit back and watch events.
FX Spread Betting, 16 Dec 08
Punters seem to have read quite a bit into the demise of the pound.
As my comment of last week warned...when even the newspapers start to talk about extreme price move potential then that is probably the moment to start taking profits and/or trading in the other direction.
GBP / USD rallied over 300 points yesterday and actually broke up through the medium term downward trend line. This may open the way up for a move towards $1.6700 as weak short positions get squeezed out.
The Euro continues to grind higher versus both Sterling and the Dollar and it too broke above the six month downward trend. Returns on the Euro versus everyone else are quite surprising given that the euro economy is (overall) doing reasonably.
The ECB will probably cut along with the BoE. With rates now down at levels unheard of in anyone’s living memory you have to wonder that there must be some impetus to the upside. In conversation with three of the brokers over the past few weeks it seems that for the first time this year there is quite a bit of medium/small fund raising managing to get done. Some of this is, to be fair, distressed borrowing but some of it is new money for new business. Are these the green shoots we have all been waiting for?
FX Spread Betting, 15 Dec 08
All the chatter about record lows recorded by sterling last week has led to a temporary halt in the currency’s weakness as we hover around the £0.8950 (€1.1173). Looking at the chart it’ll be a brave man who calls the bottom of sterling’s slide. However, as we saw with the dollar this year, currencies can turn their fortunes around just as quickly as they are destroyed.
Price Update:
GBP / USD closed last week up $0.007 at $1.482 (up 0.47%)
USD / JPY closed last week down -¥1.8 at ¥91.2 (down -1.94%)
EUR / USD closed last week up $0.058 at $1.331 (up 4.56%)
EUR / GBP closed last week up £0.026 at £0.896 (up 2.99%)
The pound is giving up even more value this morning as we hit yet another all time low versus the Euro. The GBP / EUR spread is now down at £1.1185 - £1.1189.
For those attempting to find a bottom, the last few months have been a painful experience and traders seem to be getting in on the move in ever greater numbers.
Forex markets are well known for huge trend moves (albeit with big reversals) and the current demise of the pound is a good example of this. This comment has been consistently bearish on Sterling for over a year and whilst it is tempting to continue along on the same vein I am also mindful that the plight of the pound has now caught the attention of mainstream journalists.
Analysts (who have been strangely silent until recently) are suddenly falling over themselves to call for ever lower levels. Cynicism always raises it head I am afraid and I generally feel that once everyone is calling for a move it probably means that the majority of the trend is already over.
FX Spread Betting, 11 Dec 08
Much of the news in the papers today has been concerning the weakness in the pound...as the value of the currency reaches a new all time world low.
Obviously the people who really matter in these instances do not believe a word of our political masters one bit. Think of Mr G. Brown of London and “we are better placed that everyone else to weather the downturn”.
At some point the currency will return to stability. However, this is unlikely until such time as UK assets become such good value to foreign buyers that the flow of Sterling sales turns around.
As mentioned yesterday, though, there was a good buying opportunity in Sterling versus the dollar as the support at $1.4660 looked to be holding. For once the Financial Spreads accounts appeared to be reading the runes and there was some solid long building yesterday. And again in the early hours of this morning. With the pound / dollar spread now at $1.4961 - $1.4964 clients are patting themselves on the back.
FX Spread Betting, 10 Dec 08
The markets that seem to be taking the brunt at the moment are the currencies, particularly Sterling. Trading versus the Euro and the Dollar has seen some solid Sterling buying in recent days as dealers struggle to believe that the ‘good old pound’ can really slump quite so badly.
Unfortunately for the bulls (whilst today's action is in their favour) the momentum is still definitely Sterling bearish with virtually every momentum and trendline indicator still showing renewed weakness.
Of course the beauty about charting is in how often it is complete ******** and the perversity of markets is often in the delight with which they turn against perceived wisdom.
The pound has had a grim time of it and may have further to fall but there is a good chance that there may be a little rally to chase out weak shorts who have only recently joined the ride down.
Versus the dollar the $1.4660 level could prove crucial as even though we have traded through this level in the last month we have never actually managed to close below it. While we remain above this mark there is the potential for a sharp rally.
The immediate effect of the President elect’s words was, not surprisingly, a weakening in the dollar but this now seems to have played out and Sterling is once again the whipping boy on the exchanges.
Versus the Euro, the Pound is looking particularly sick as we fail to make any headway in attempts to escape from the current £1.15 region. In recent days the cross has made a series of attempts to move back above £1.1625 and to get below £1.1450, all to no avail but, it must be said that, given how far the currency has fallen in the last year you would have thought that there might be the odd buyer out there.
The fact that Sterling keeps slipping from ledge to ledge with no real attempts to step ‘up’ does not bode well for longer term stability.
Virtually every chart you look at shows the pound in long term decline and now that the artificial prop of ‘high’ interest rates has been removed it is difficult to see what would tempt a long term buyer to contemplate a Sterling long.
FX Spread Betting, 8 Dec 08
GBP / USD closed last week down -$0.058 at $1.475 (down -3.78%)
USD / JPY closed last week down -¥2.4 at ¥93.0 (down -2.52%)
EUR / USD closed last week up $0.005 at $1.273 (up 0.39%)
EUR / GBP closed last week up £0.043 at £0.87 (up 5.2%)
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Forex Spread Trading December 2008' by DB, updated 19-Dec-08
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