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Tag: EURGBP

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Sterling Digest, April 13, 2012: the China effect

China and the paradox of prosperity, The Economist
What effect will China have on sterling?

If there were any doubts to China’s ability to move the markets now, there shouldn’t be. China’s soft data release very early in the Friday session has plagued risk currencies like the commodity currencies and the euro. And $GBPUSD and $GBPJPY remain weak as risk aversion flows strengthen the USD and JPY across the board.

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What Do You Do With 18 Billion Euros?

You sell them for other appreciating currencies.

It’s no secret that the SNB has been in the markets buying euros to maintain its 1.20 EUR/CHF currency peg. The euro, however, is a loosing currency to hold as it looses value in the face of its sovereign debt and political crises. To hedge against this loss of  euro value and diversify its foreign reserves as it accumulates euros, a pattern, first noted by Credit Writedowns and included in yesterday’s digest, has emerged that the SNB sells its intervention euros for other, more valued currencies. And it looks like one currency of choice may be sterling.

EURCHF DAILY CHART
Euro has drifted higher in the face of intervention
EURGBP DAILY CHART
However, euro sells off versus the sterling post-intervention

Sterling strength has been mysterious to many traders because UK fundamentals are so poor (poor economy and tons of QE). Perhaps the SNB has been big buyer of sterling as it looks to quietly get rid of a devaluing euro that it is forced to buy. Now as $EURCHF is hovering around the 1.20 peg, I have to wonder if we’ll see a drop in $EURGBP when the SNB enters the forex market again. Some argue the SNB is already in the market.

OK, I step off my conspiracy theorist soapbox.

 

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Sterling Digest, April 10, 2012: accommodating growth

A new twist in Myanmar
Arm twisting has also forced the UK to forge new international relationships

Sterling has been mixed bag as European traders came back to the markets today after a long Easter weekend. Currency pairs should trade very technically during this relatively quiet news week out of the UK.

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Sterling Digest: April 4, 2012

A Bank of England Old One Pound Banknote
Looking ahead to the BoE

UK PMI numbers continue to surprise to the upside this week. While this string of positive data is not enough to declare a robust recovery in the UK, it certainly can be enough to keep the Bank of England from moving on monetary policy tomorrow and allow them to wait-and-see. With ECB out of the way today, traders look ahead to tomorrow’s BoE interest rate announcement.

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Sterling Digest: April 3, 2012

US Dollars
Today was all about the greenback baby

The $FED completely changed the game. While Bernanke had been on the circuit implying more QE was on deck, the minutes revealed a much more hawkish Federal Reserve. And as a result, the USD rallied across the board. Now the question going forward is whether the USD is really gaining strength or are traders being given a USD-selling opportunity?

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Sterling Digest: March 30, 2012


If central banks allow gold to become money, how would they enact QE??

A choppy week has given away to sterling strength with $GBPUSD breaking above the major psychological level at 1.60. Traders say month end flows are to blame for sterling strength when its fundamentals hold a more ominous outlook for the currency. BoE next week will continue these breakouts and trigger some profit-taking as most pairs sit GBP bullish at key levels into the weekend …despite the headlines.

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Sterling Digest: March 27, 2012

Britain's budget for global business
Weak economy, strong sterling. Go figure.

Sterling refuses to weaken even as economic data slips and members of the BoE still look to add more QE. The $GBPUSD continues to make higher highs at 1.5999 though still remains capped by the major 1.60 level. Even the almighty commodity dollars (AUD, NZD, and CAD) are weak against the GBP. Are we seeing the beginnings of a bear trend reversal in sterling?

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Sterling Digest: March 21, 2012

I think I see a recovery on the cover of The Economist
UK forecasts 2012 GDP at 0.8%

A big day in UK politics with release of Bank of England minutes and the announcement of the country’s budget produced incredible moves in sterling today.

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Sterling Digest: March 20, 2012

10 pounds down the drain
Down drain into a pile of money

The new trading week may have opened with GBP bullishness but as the Monday session ended sterling slipped across the board into Tuesday’s UK inflation release. Expect GBP to weaken further on softer-than-expected inflation even though it is certainly a good thing for the British economy. Don’t expect much follow through on weakness. Sterling may look weak on fundamentals but recent price action favors GBP.

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Sterling Digest: March 14, 2012

Coinage
Despite the bears, sterling won't fade easily

No real surprises from the $FED or the BoJ yesterday as both left interest rates unchanged. With equities higher still after the FOMC statement, it is hard to see risk currencies fall more from here. While the USD seems to be trading on fundamentals (rising on good US news after both US NFP and somewhat hawkish Fed statement), it remains to be seen if that is a new shift in the market or if risk still rules investor sentiment.

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