Author: @faithmight

Sterling Digest, May 23, 2012: flip-flop
Bank of England logo

Adam Posen’s flip-flop on QE makes the Bank of England more dovish especially as economic data continues to deteriorate at an alarmingly fast rate. While the $GBPUSD and $GBPJPY have been sterling weak, these pairs’ move lower is also tied to increased risk aversion. Conversely, sterling has remained very robust against the commodity dollars. Both the $GBPAUD and $GBPNZD have already made new highs on the week. Will tomorrow’s UK GDP release be the final nail in the GBP coffin?
- BOE’s ‘Finely Balanced’ Decision Keeps QE Options Open (Bloomberg)
- UK may need more QE, warns Bank of England’s Adam Posen as he steps down from the MPC (The Telegraph)
- Bank of England’s Paul Fisher says no to QE unless crisis hits (The Telegraph)
- WEAK APRIL RETAIL SALES (EconomicisUK.com)
- UK inflation falls to lowest for more than two years (The Telegraph)
- Bank of Japan Holds Off on Easing Policy as Expected (CNBC)
- Originations: Greek Exit Edition (The Basis Point)
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May 23, 2012
Sterling Digest, May 22 2012: mixing business and pleasure
Could be a G8 reaction to markets

G8 summit leaders enjoyed their weekend in a retreat, unconference with very mixed reaction from markets. The open was spent violently going nowhere as cable is still bouncing around 1.58. No momentum or conviction on either side. Sounds like opposing G8 stances, doesn’t it. As the news week gets underway a huge drop in UK inflation that has hit its lowest levels in over a year. Less inflation leaves the door open for more QE at a time where economic data has not been supporting the hawks at the BoE. The market looks ahead to the BoE minutes release tomorrow to see if recent hawks have new dovish feathers.
- The Calculated Mover: EURGBP (DailyFX)
- GBPJPY, Pivot Points Standard (Chart.ly)
- GBPUSD Update (50’s Blog)
- Step Aside British Pound, Japanese Yen Returns As Safety Currency Of Choice (Seeking Alpha)
- British economy may ‘never quite recover’ from a severe Euro collapse (The Telegraph)
- IMF tells UK to consider rate cut to boost growth (BBC)
- UK’s Cameron calls for euro contingency plans (Reuters)
- Statement from G8 world leaders (Reuters)
- G8 summit: Leaders must make friends at the G8, says David Cameron (The Telegraph)
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May 22, 2012
Sterling Digest, May 18 2012: Facebook Friday
Mark Zuckerberg rings the Nasdaq bell from California (Zef Nikolla/AP)

$FB is so hot that Nasdaq brought the bell to them. However, $FB Friday didn’t change profit-taking week end flows leaving sterling a mixed bag on the week. $GBPNZD has been a monster breaking out to new highs again this week. $GBPAUD and $GBPCAD, meanwhile, chopped around in wide ranges. And the $GBPJPY and $GBPUSD fell hard. A $GBPUSD close BELOW 1.58 is as big a deal as a close below 125.00 is for $GBPJPY. Those cracks we noted all week in this digest seemed to widen a bit more today.
- GBPJPY Moves Below 100 Day MA (Forex Live)
- Fib RETRACEMENT Taken from the March Advance shows interim support at 1.5750 (Chart.ly)
- Britain says ECB could do more to suppport demand (Reuters)
- Lloyds’s Williams Says BOE Must Preempt Need for QE (Bloomberg)
- BoE and Fed Ignite QE Hopes (Currency Solutions)
- Merkel under pressure at G8 for eurozone economic stimulus package; Cameron seeks to build ties with Hollande (Open Europe)
- Facebook on SecondMarket (SecondMarket)
- Facebook Seeks To Be Infrastructure (Bloomberg)
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May 18, 2012
Sterling Digest, May 17 2012: blame the eurozone
With a new election looming, Greece is slouching towards the drachma

An interesting theme has caught fire in the markets in recently: BLAME EUROPE. The entire world blames the Eurozone for global economic slow down, weak markets, and high inflation. The Eurozone blames Greece. The Greeks blame the government. The government blames the markets. The markets punish the euro.
- David Cameron says UK’s ‘safety’ paramount in euro crisis (BBC)
- U.K. Wages Will Keep Falling, While Bonus Payments Slump (WSJ)
- David Cameron: Eurozone “either has to make-up or it is looking at a potential break-up” (Open Europe)
- Lecturing Germany on the euro could be a diplomatic own goal for Cameron (The Telegraph)
- SNB: Defending the Floor (WSJ)
- NERVES BUILD OVER RISK OF “DISORDERLY” FALL OF BRAZIL’S REAL (Dow Jones)
- France will not ratify current EU fiscal pact (Al Jazeera)
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May 17, 2012
1.60 The Big Figure

The Bigga Figure

The market loves magic numbers. And the one on radar is 1.60. GBP is dealing with 1.60 on 3 currency pairs that I follow. This is quite uncanny and ironic but maybe not so much coincidence. $GBPUSD, $GBPAUD, $GBPCAD is a strong dollar bloc. Their breakouts above 1.60 marked technical reversals across this bloc to new yearly highs. But this week’s breaks below 1.60 looks to undo all of that.

Looking back a year at $GBPUSD reveals that a break below 1.60 after breakout above only points to more weakness. What started as a correction has already turned to a reversal in the $GBPUSD today. @EdMatts did a great video explanation so good it was highlighted twice in the Sterling Digest.

$GBPAUD hasn’t held up in the past when it broke below 1.60 after new highs. Where it has held, price rallied for hundreds of pips before topping out.

So now look at the $GPBCAD. It is still holding up as today’s low at 1.6003 is ahead of the big figure even if only by pips. It then bounced over 120 pips to settle at 1.6100 (as of this writing). A close above 1.60 keeps the pair bolstered for a rally higher. But with lower highs on the daily chart, a rally to met by sellers until buyers can prove themselves with new highs.

Nonetheless suffice it to say that 1.60 is a serious psychological level for sterling at the moment. Trade what you see!

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May 17, 2012
Sterling Digest, May 16, 2012: cracks deepen
Weak sterling still looks good

Sterling cracks from Friday that were glossed over on safe haven flows deepened today thanks to Bank of England Governor Mervyn King. Complete with a GDP downgrade for 2012, King’s inflation report weakened sterling across board. However, currency pairs like the $GBPCAD, $EURGBP and $GBPAUD are holding up quite well in the aftermath. General commodities weakness and euro woes continue to benefit GBP verus these currencies. These same conditions also benefited the USD as the $GBPUSD closes below 1.60 for the first time in 4 weeks.
- Bank of England Inflation Report presser: live blog (FT)
- Euro crisis a threat to slow UK recovery – BoE’s King (Reuters)
- UK’s Cameron: Eurozone Must Act Or Face Break Up (Forex Live)
- GBPUSD Update (50’s Blog)
- GBPUSD Bounces Off The 38.2% Of 2012 Range (Forex Live)
- GBPJPY Update (50’s Blog)
- Bundesbank Confirms German Gold Held By FED, BOE and Banque De France (Zero Hedge)
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May 16, 2012
Sterling Digest, May 15 2012: safety status rules
Safety trumps economics

The safe haven sterling rallies on. After a dip in GBP on weak UK trade balance numbers, the $GBPAUD, $GBPCAD, $GBPNZD, and $EURGBP continued on in their strong sterling bull trend. The only currencies that gained on the safe sterling today are the almighty rulers of risk aversion: the greenback and yen.
- Yields on UK government bonds drop to record low at 1.87% (The Guardian)
- Austerity Under Fire: One Of Several Economic Drags On The U.K. Vs. The U.S. (Seeking Alpha)
- RBA hints at further rate cuts (The Sydney Morning Herald)
- Commodities at five-month lows (FT)
- UK PMI Manufacturing Exports (Markit Economics) [chart]
- GBPUSD Update (50’s Blog)
- GBPUSD Daily Chart (yfrog)
- EUR/GBP Daily Outlook May 15, 2012 (Daily Forex)
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May 15, 2012
Sterling Digest, May 14 2012: safety trumps economics
Investors want pounds

It appears that Friday’s theme was mere profit-taking as good news out of Canada and US was excuse enough to move some money off the table. Sterling is back on trend today with comm dolls leading the way. $GBPAUD, $GBPNZD and $GBPCAD have all broken out above their Friday highs in opening market action. While fundamentals point toward a deteriorating UK economic picture, risk flows dominate with GBP enjoys European safe haven status.
- David Blanchflower: The recession deniers have gone strangely quiet this month (The Independent)
- Interest rates expected to remain ‘on hold through 2013’ (The Telegraph)
- Safe-Haven Pound Need Not Kill Off Exports (EconoMonitor)
- Scotiabank – GBP: Safe haven and intra?European diversification flows likely to provide support (FX Street)
- China’s RRR Cut And Greek Uncertainty Pull In Opposing Directions (Forex Live)
- Today’s Orderboard (Forex Live)
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May 14, 2012
Sterling Digest, May 11 2012: the cracks appear
Hollande may not be any different for the euro

Sterling ends the week weak across the board. Profit-taking was the theme this Friday trading session as investors banked pips on a strong bull trend in sterling that has been raging for weeks. As we head into the weekend, the question that traders start to ask is: did we witness a correction this week or the beginning of a reversal as the market comes to grips with a very weak UK economy relative to others in the G10 such as Canada, Australia, and the US. Watch the major psychological level at 1.6000 in $GBPUSD, $GBPAUD, and $GBPCAD for answers into the new trading week ahead.
- King Seen Signaling QE an Option as Euro Tensions Flare (Bloomberg)
- Euro Anti-Austerity Votes Pose Dangers for Britain (EconoMonitor)
- David Cameron: the man in the middle in Europe (The Telegraph)
- GBPUSD Update (50’s Blog)
- Lots of questions about GBPCAD (Chart.ly)
- The Nasty Cable Trade (MarketVision TV)
- EUR/GBP: Retest Of .8000 Likely After Brief Bounce (FX360)
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May 11, 2012
Exit The Euro

It has to be a very scary thing when your banks, companies, households and even governments can’t pay down its debt. Can a currency be made worthless based on its debt load in a world where money is electronic and can be minted with a push of a button? We just may soon find out. Exit the euro.

May 11, 2012