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
THEY DON'T RING THE BELL AT THE CRPTO MARKET TOP! - 20th Dec 24
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 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