Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

British Pound Renewed Weakness

Currencies / British Pound Aug 31, 2009 - 02:35 AM GMT

By: Seven_Days_Ahead

Currencies

Best Financial Markets Analysis ArticleThe Macro Trader’s view: On the 30th July, 4 weeks ago, we wrote a piece entitled “How vulnerable is Sterling”, our conclusion at the time was that we thought it not very vulnerable against the Euro, since we judged, based on available macro economic data available at that time, that the UK looked closer to emerging from recession, than did the Euro zone, and in some respects the UK economy compared favourably against the US economy too.


So what has changed over the last few weeks?

The Euro zone economies of France and Germany have since released Q2 GDP data showing they have emerged from recession, moreover, other data:

  • The Euro zone PMI composite survey,
  • The German PMI Services survey,
  • Both German and Euro zone ZEW surveys, and
  • More recently German IFO.

Have shown improvement which lends support to the surprisingly better GDP data that was initially taken not only with disbelief, but discounted on the grounds the improvement would prove unsustainable.

In the US while data has remained mixed, with:

  • Retail sales undershooting consensus,
  • CPI & PPI falling further than expected, and
  • The recent ISM non-manufacturing survey disappointingly coming in below consensus,

There have been some key positives:

  • Non-farm payroll has continued to moderate showing a steadily declining pace of job destruction,
  • The ISM manufacturing survey continues to improve, but more importantly
  • The Housing market has shown further important signs of recovery with both Existing and New home sales coming in higher than consensus over the last week, indeed New home sales, a GDP component, rose by 9.6% month on month as reported only yesterday.

Furthermore, the Fed’s Lacker said today “the economy (US) is levelling out and housing is no longer a drag.

While all of this explains the international environment, what has changed in the UK?

The Bank of England has surprised the market several times in the last few weeks by 1st  resuming its QE after suspending it the previous month, but more importantly, at the same time increasing it to £50.0B, this hit Sterling.

Then the Bank of England quarterly inflation report painted a picture of subdued inflation over the two year target period, based on current interest rates, which surprised both interest rate traders and currency dealers and undermined the Pound.

But if that wasn’t enough, the recent MPC minutes revealed that Governor King and two colleagues wanted to increase the QE by a larger £75.0B, indicating the Bank may not yet be done with easing and this too depressed Sterling.

But probably the biggest shock came today when quarterly investment data was reported to have shrunk by 10.4% in the 2nd quarter and by 18.4% year on year. This not only explained the shock Q2 GDP contraction of -0.8% released a few weeks ago but probably makes any upward revision unlikely.

However the UK economic picture isn’t all black, retail sales continue to expand and the housing market continues to confound the pessimists by showing clear signs of revival.

But as for the Pounds fortunes, they look less optimistic than they did 4 weeks ago, but much of the negative UK data quoted above is already historic, the Pounds fortunes will be decided by the run of data as we move forward and there are still strong indications that the economy could emerge from recession later this year, so short/medium term Sterling looks vulnerable, but longer term it should stabilise and gradually recover.  

Mark Sturdy
John Lewis

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2009 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in