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Tag: FXB

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Sterling Digest, 9 July 2013: the Carney effect

Mark Carney face on 20GBP note
Too soon? Or not soon enough?

Last week, on the 4th of July, Mark Carney made his 1st move as Bank of England governor. While the BoE did not move on monetary policy, it was Carney’s introduction of forward guidance that sent sterling tumbling across the board. Under the Carney effect, GBP has been unable to recover as the fundamentals have completed shifted in a very unexpected manner. Many market participants expected Carney to wait until next month to bring any changes to monetary policy. Carney’s big surprise  should bring sterling to new lows across the board during this 2nd half of the year. The Carney effect will only be exasperated by poor economic data as we saw today and merely slowed, not reversed, by any upside surprises in data.

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Sterling Digest, 1 July 2013: dawn of the Carney Era

Mark Carney at the Bank of England
New Bank of England Governor Mark Carney

This is an exciting time for sterling traders as we lay witness to the dawn of a new era. Mark Carney takes the helm today as the new Bank of England Governor. The market, as well as some top officials in the UK government, have been widely anticipating this transition since it was first announced last November. Former Governor Mervyn King has led the BoE my entire forex career. I will miss the always predictable market reaction to King’s speeches (King speaks, sell sterling) but it seems the British are ready for new monetary leadership. Though Carney has set market expectations as a GBP bear, prices will not plunge just because he steps into office. The market will size him up first with plenty of price fluctuations and positioning in anticipation of his 1st interest rate announcement and inflation report. Will the Carney Era bring sterling strength or weakness? British prosperity or recession? In 5 short years, the markets will have their verdict.

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Sterling Digest, June 11 2013: sterling recovery

Cartoon from Leadbelcher on flickr
Was King right? We’ll never know.

Sterling has broken out across the board to new highs in an amazing display of strength. Last week’s BoE decision to keep monetary policy unchanged was a huge boost for sterling. It was also the last BoE meeting under Governor Mervyn King. King has drawn criticism from many market participants especially since the dawn of the 2008 financial crisis. The irony, however, is that the UK economy may be enjoying a recovery just as he retires and steps down.

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Sterling Digest, May 27 2013: the last week of the month

 

Gold Star lapel pin sits to the left, with the Next of Kin lapel pin on the right
Symbols for fallen Servicemen

Memorial Day was started by freed slaves who sought to honor Union soldiers who had died in the Civil War. It is a day we all pause and think about what service in the military means for freedom. It also marks the beginning of summer; and a holiday shortened trading week. There is very little on the economic calendar from the UK again this week. Lots of releases scheduled out of the US however. USD positioning and flows will certainly grip the forex market again this week. That makes the $GBPUSD a prime opportunity. It also makes the $EURGBP a bit of a battleground. Pick your poison.

Read last week’s Sterling Digest.

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Sterling Digest, May 22 2013: King starts the exit

picture of BoE governor Mervyn King
King’s last stand

The $GBPUSD is now 2 weeks into May and its seasonality trend is still in play. These are the times traders sit on their hands and do nothing to allow their winners to run. Sell in May has never rang so true. Fundamentally, BoE Governor King used his final inflation report to start the exits from the Bank of England. Last week’s speech might have been the 1st time that sterling ever rallied on comments from Governor King. Nonetheless, $GBPUSD opened this new trading week below 1.5230 signaling further losses ahead.

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Sterling Digest, May 7 2013: April tops, May bottoms

GBPUSD 1 WEEK CHART
May selloffs

Cable ended April hitting the 50% Fibonacci retracement level to the PIP. Pretty impressive for a 30-day rally. As $GBPUSD tops out at 1.5606, it begins the 1st week of May with a lower high (as of this writing). Seasonality trends would have traders note that cable has topped out in April each of the last 3 years. In May 2010, cable was below 1.55 and fell to brand new long-term lows by the end of the month. $GBPUSD finds itself in a similar situation with price action only 40 pips above 1.5500. This week’s BoE rate decision will be closely watched thanks to the RBA’s long-awaited interest rate cut. Most still think the BoE holds policy until Mark Carney takes the helm so Thursday’s event could be a non-event. As such, sterling could be a mixed bag. The ECB, RBA, and BoJ are clearly dovish while the BoC and RBNZ are hawkish. The Fed is on watch but positive data continues to build the case for a strong USD. The BoE’s decision sets the tone for sterling the next 30 days. Which way will the Old Lady lean?

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Sterling Digest, April 30 2013: April rallies bring May selloffs

Slow Trek Into Recession movie poster
Could GBP’s best days be behind it?

Today is the last day of the month and sterling has enjoyed April. $GPBPUSD closed last week at 2-month highs with a rally that finally took it above 1.55 to 1.5546. $GBPAUD rallied to new highs above the 1.50 major psychological level not visited since Feburary. $GBPCAD moved to spike highs at 1.5823. Needless to say, its been a breakout month. Despite the bullish price action, sterling is still very much correcting on long-term timeframes. All the aforementioned pairs are at or around the 50% Fibonacci levels on the weekly charts. And tomorrow is May. For the last 2 years, $GBPUSD has seen a tremendous sell-off in May. Being at new highs and technical levels sets sterling up for a fall more dramatic than its rally.

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Sterling Digest, April 16 2013: terror attacks

Iron Lady rightfully(?) kicking the King of Capitalism

What happened Monday? What a trading day. Commodities fell off a cliff in a real scary way. $GBPAUD, $GBPNZD, and $GBPCAD rallied over 200 pips in yesterday’s trading session as those commodity dollars took a major hit along with $GLD, $SLV, and $CL_F. It was incredible. Then bombs exploded later Monday morning during market hours in Boston. Another terrorist attack in the United States. The USD rallied slightly on the news as $GBPUSD tumbled below support but in today’s trading session cable looks bullish again. The markets feel a bit more stable today as the sterling continues to firm except versus the euro. $EURGBP has taken out major resistance at 0.8570 as it has rallied to new highs so far today at 0.8582. What is the world coming to?

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Sterling Digest, March 26 2013: intriguing strength

front page of City AM March 21 2013
Perfect environment for a weaker GBP

Thanks to Cyprus, sterling managed to catch a bid last week on European haven flows. To start this new trading week, however, GBP has traded weak with $GBPUSD, $GBPAUD and $GBPNZD all off their highs of last week. Naturally, sterling still remains stronger versus the euro as the Cypriot crisis still remains. With a relatively light news week from the UK, look for sterling to remain mixed as it gains strength against the euro and possibly the USD but remains weaker against the commodity dollars.

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Sterling Digest, March 17 2013: dangerous precedent

cartoon depicting Cyprus bailout
Very dangerous indeed

Cyprus has put the PIIGS front and center again just when market participants thought that ship had finally sailed. Citizens of the PIIGS, in particular, should rightfully be concerned about the possible seizure of their bank accounts. Furthermore, if you have money parked in any country that was on the brink of a bailout, you are headed to the ATM right now and to the teller window come Monday. So what does this have to do with sterling? Just when it looked like the weak GBP trend would resume in this new trading week, expect sterling to strengthen on the back of safe haven flows behind the USD, CHF, and JPY. While this is certainly the case for the Monday open, will this new safe haven status really last? With all the news from the UK this week — CPI, BoE minutes, unemployment report, and retail sales — one can have her doubts. Not to mention the RBA and FOMC minutes releases too. Remember it is market reaction to the news, not the news itself, that dictates price action. This week will be no different.

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