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 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
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

British Pound Perks Up, Can the Uptrend Be Sustained?

Currencies / British Pound Jul 16, 2010 - 04:42 AM GMT

By: Seven_Days_Ahead

Currencies

Best Financial Markets Analysis ArticleThe Pound suffered a steep sell-off against both the Euro and the Dollar during the financial crisis/recession as the UK’s public finances deteriorated at a faster pace than other developed economies.

Indeed, as the recession seemed to go on longer than in many other G7 economies, the Pound at one point looked at risk of breaking par against the Euro and approaching lows not seen since the mid 1980’s against the Dollar.


But a change of government in the UK with a focus on cutting the budget deficit, mainly through public spending cuts has put a floor under the currency, especially against the Dollar. The UK has set out a tough and credible plan to reduce its budget deficit and in 5 years time forecasts a structural budget surplus.

While there are fears that the medicine could tip the economy briefly back into recession, the most likely scenario is a period of slower or indeed flat growth as the Bank of England keeps interest rates at historically low levels.

Although there is some noise from one or two MPC members about the need to begin a gradual tightening process, we judge the majority on the MPC realize that the government’s plans to effectively drain spending and resource utilization from the economy will bear down on inflation and monetary policy needs to remain loose to offset what is set to be a period of aggressive fiscal retrenchment.
Compare and contrast this with the US: The US economy, which until recently looked embarked on a self sustaining recovery, now looks to be weakening. Virtually every area of the US economy is causing some concern:

  •      The ISM manufacturing and non-manufacturing surveys while still forecasting growth, are doing so at steadily slowing rates,
  •      Retail sales show consumer demand is weak,
  •      Non-farm payrolls and Jobless claims report not enough jobs are being created to employ new entrants to the labour market, let alone re-employ the millions thrown out of work during the recession, and
  •      Inflation is very low, perhaps too low?

The Fed is now concerned inflation may fall too far. And whereas only a few weeks ago the debate was when should the Fed begin to tighten policy, the latest FOMC minutes reveal policy makers are concerned enough to talk about additional easing, albeit judged not necessary quite yet.

While a slowing US economy would ultimately be bad news for the UK economy, the Pound currently benefits from the very different outlook for public spending in the two countries. As previously said the UK is on a mission to eliminate its structural government deficit, the US is still spending with alacrity and if he could get it through Congress, Obama would deploy a second stimulus racking up yet more debt and speeding the US debt to GDP ratio ever closer to 100%.

So, for now, the Pound benefits from the dynamics at work both in the UK and the US economy.

The Technical Trader’s view:


WEEKLY CHART

The market is stuck between two major levels of support and resistance.

And above the market is a critical resistance from the low at 1.5709.

Now look closer.

DAILY CHART

The downtrend was broken in June and with some volatility the market has continued to go better. The prior Highs at 1.5217 and 1.4720 should be good support on any pull-backs.

Note well the band of resistance 1.5536-1.5706.

The Pound can strengthen further, but resistance is approaching and will be powerful in resisting further advances above 1.57

Stand back,

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.

© 2010 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