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Category: The Sterling Digest

The Sterling Digest now as a weekly summation of news to consider when trading GBP pairs, in particular.

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Sterling Digest, May 1 2012: the doves rally sterling

The rather dangerous, The Economist cover
The political reason the ECB turns dovish

Everybody knew that the RBA was set out to cut interest rates. But the RBA surprised the market with a much bigger than expected cut of 50 basis points. $GBPAUD rallied hard after the announcements and remains over 100 pips above its pre-RBA levels. The ECB also delivers an announcement on interest rates this week. The ECB is also expected to be dovish as the central bank shifts its focus off the banks and on to their economies. The $EURGBP remains below 0.82. Can sterling continue its rally on dovish sentiment from other central banks?

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Sterling Digest, April 29 2012: bears want in

One pound coin
One pound coin

After such a bullish close to the week, it seems almost natural that sellers and sterling bears start piling into the market looking for their next opportunity at these higher levels.

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Sterling Digest, April 28 2012: weak sectors can’t stop sterling

House and UK Pounds
UK housing market may still be weak but sterling sure isn't

$GBPUSD slaughtered bears today as it charged to new yearly highs to close the week above 1.6250. That’s a bullish statement. The nice thing about this trend is that there have been corrections along the way so it is hardly overbought. And while this rally started in the midst of UK QE3, now that the central bank has turned hawkish there may be no stopping this sterling rally. Despite what you may think about the UK economy, it is the central bank’s turn in sentiment that strengthens sterling right now. And that makes this rally for real.

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Sterling Digest, April 26 2012: double-dip musings

UK : 20 Pounds : Reverse
Manufacturing written on the money. It's that important.

There is so much commentary about the British economy following the release of official data that revealed the UK economy is in a double-dip recession. Traders, however, look ahead to the Bank of Japan rate announcement for whether the $GBPJPY remains supported above its major psychological level at 130.00.

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Sterling Digest, April 25 2012: market follows central bank not economy

Mark Prisk, UK Business Minister
UK companies are backing a new Government campaign to highlight the best of modern British manufacturing at an exhibition during the Olympic Games. Will it work?

It was the hawks versus the doves of the BoE and today the hawks won. Even with the UK falling into a double-dip recession, the BoE has already told the market that the economy is actually stronger than the number would reveal. They are ignoring today’s GDP release. And the market followed suit with new yearly highs. We noted yesterday that any sterling weakness on the back of a disappointing GDP number would be temporary. Coupled with Bernanke keeping the door open for QE, $GBPUSD bulls remain well supported above 1.60.

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Sterling Digest, April 24 2012: the moment of truth

Is another recession on its way?

Wednesday may be a moment of truth in this sterling rally that has taken hold since the beginning of the year. Though the Federal Reserve announces its decision on monetary policy tomorrow, sterling traders have their eyes on the UK GDP release earlier that morning. But the Bank of England has already dismissed the GDP release. The BoE gives inflation trends more weight than the economy when setting monetary policy. So on disappointing GDP expect sterling to weaken, but that move lower may only be temporary as the market discounts GDP much like the BoE already has.

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Sterling Digest, April 23 2012: bulls maintain control

pounds and pence
Pounds and Pence

$EURGBP breaks to new lows to open the new trading week as fully anticipated by many in Thursday’s digest. Sterling also maintained bullish momentum versus the commodity dollars as $GBPAUD, $GBPNZD, and $GBPCAD continued to rally higher in Monday trading. $GBPUSD was the odd man as it trades in a narrow range struggling with both a strong USD and strong GBP. If USD strength remains, look for cable to correct lower to 1.60 before rallying again to new highs.

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Sterling Digest, April 22 2012: double-dip risks

GDP projection based on market interest rate expectations and £325 billion asset purchases
Large risk here of a double-dip

The Bank of England is sounding very hawkish with commentary from both Adam Posen (uber-dove) and Andrew Sentance (uber-hawk) featured today. However with double-dip calls coming out of the UK, the market is already looking ahead to Wednesday’s UK GDP release. Currently hawkish sentiment will drive an already rallying sterling higher into the release. However, the risk of a contraction could see sterling tumble severely on disappointing data.

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Sterling Digest, April 20 2012: sterling hot

A Bank of England Old One Pound Banknote
Sterling so hot even old notes find value

Sterling has staged a breakout across the board this week as its underlying fundamental landscape has turned hawkish. Early Friday trading saw GBP break to new 2012 highs versus the AUD, CAD, USD, and NZD. Its been a tremendous week. So it is no wonder that many traders are looking to get short sterling into next week. Whether this is a good idea or not depends on your timeframe. Just remember though, the trend is your friend.

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Sterling Digest, April 19 2012: the euro is dying

Bureaucracy. Democracy
Bureaucracy kills the euro

The streams are buzzing with $EURGBP talk as the pair finally breaks out to the downside for new yearly lows. This pair remained rangebound for 4 months as the ECB, IMF, and EU kept the market in great suspense on what it was going to do about Greece and the other PIIGS. Unlike other QE-wielding central banks like the BoE and the $FED, the ECB took its time in dealing with the financial crisis within its borders. As larger economies like Spain and France start to teeter, the long term euro implications of early inaction could be devastating and sterling stands to benefit.

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