GBP Getting a Hammering - What is Your View as to Why?

[Trader333]

The GBP is almost at the lowest point it has been for the last 52 weeks and in my view will probably crash through the base and continue going down. What are your views on why this is happening and the likely future scenario ?

 

[Thermal Ebb]

Fiscal and monetary policies not sustainable.

GDP falling and insufficient government spending to prime the economy sufficiently to induce growth.

Rising unemployment = reduction in consumer spending.

Exports weakening.

Primary import sources prices rising in real terms.

Inflation basal at 2% but unlikely to be held at that level to year end.

Lack of investment in and from private sector.

Hoarding of cash by traditional providers of credit.

Lack of confidence in future.

Exposure to EZ as large (40%) trading partner.

Deficit widening.

GDP = C + G + I + X - M. Not rocket science.

 

[wackypete2]

Uncertainty.
Possible ratings downgrade on the horizon, surrounding eurozone still a mess, growth in the UK likely to be weak for 2013, and likely that the BOE is doing nothing to stop the current drop.

Peter

 

[bbmac]

Technically it is because there are more sellers than buyers and technical trends tend to be self fulfilling to some extent - ie the pullbacks get bought or sold etc.

Fundamentally speaking the new incoming BOE Governor Carney has talked about more flexible inflation targetting etc and Merv the Swerv (current BOE Governor) King has effectively re-itterated this in recent comments. Today's MPC minutes showed King outvoted for only the 4th time, as his tenure is coming to an end - ie the vote for no more QE came in at 6-3 against 9-0 last time out and there was discussion too of a rate cut. King has already said that Qe is experiencing and and more will likely experience diminishing returns now and so to some extent with a possible triple dip recession on the cards after the Qtr 4 -0.3% initial GDP read - market participants may be beginning to sense that both the Govt thru fiscal policy and the BOE thru monetary policy are fresh out of ideas ? This and the uncertain European economy has all added to the downside pressure on the £. The Uk Chancellor's upcoming budget is p[robably key now and the markets will doubtless be looking for a very pro-growth stance from him.

G/L

The GBP is almost at the lowest point it has been for the last 52 weeks and in my view will probably crash through the base and continue going down. What are your views on why this is happening and the likely future scenario ?

 

[Thermal Ebb]

incoming BOE Governor Carney has talked about more flexible inflation targetting

Carney will make a switch to nominal GDP almost immediately. There's something to be said for making things look a little rosier right from the off.

 

[new_trader]

The GBP is almost at the lowest point it has been for the last 52 weeks and in my view will probably crash through the base and continue going down. What are your views on why this is happening and the likely future scenario ?

The fundamentals for the U.K are shocking and getting worse. That's why I've been selling the pound and getting into foreign currencies, stocks and gold for the last 3+ years. I'll keep doing it too because this welfare/warfare state is going to get worse...think Greece, Bulgaria etc...

 

[Trader333]

All valid points although not much has really changed in the very recent past and the decline has been rapid in the last few weeks. The Euro is also gaining major strength against the GBP which would not really fit with the view that it is exposure to the EZ that is making things worse.

It will be interesting to see how different things become when the new governor of the BOE takes office although I am of the view that little impact will be made as a result.

 

[tar]

All valid points although not much has really changed in the very recent past and the decline has been rapid in the last few weeks.

Carney that's new ...

 

[bbmac]

I would disagree - there is a changed tone/emphasis from Merv the Swerv and Carney is setting a new tone for the future...look how the market sold off after his testimony to Treasury Select Committee and how it sold off today re it's reaction to 6-3 MPC vote re QE. Today also becoming clearer that barring some creative accountancy (which they will likely employ) Govt likely to miss borrowing targets - yes suspected for a long time but becoming clearer again today - which will impact on sovereign debt credit rating etc....sometimes it is a confluence of realistations when the market finally acts on the fundamentals...but when it does.....

All valid points although not much has really changed in the very recent past and the decline has been rapid in the last few weeks. The Euro is also gaining major strength against the GBP which would not really fit with the view that it is exposure to the EZ that is making things worse.

It will be interesting to see how different things become when the new governor of the BOE takes office although I am of the view that little impact will be made as a result.

 

[Trader333]

sometimes it is a confluence of realistations when the market finally acts on the fundamentals..

Yes I can see your point and of course the fall will just make things worse with higher prices and ongoing inflation. The view that exports will become more attractive is not relevant in my view when our net BOP is much higher for imports.

 

[Thermal Ebb]

All valid points although not much has really changed in the very recent past and the decline has been rapid in the last few weeks. The Euro is also gaining major strength against the GBP which would not really fit with the view that it is exposure to the EZ that is making things worse.

Euro relative strength against sterling only won out from the end of last year. It's not so much sterling weakening as the euro strengthening. Euro has come up from the bottom of the pack in July last year to take the lead just 4 weeks ago. Perhaps your question would then more possibly be 'Why is the Euro getting pumped?'.

My earlier response stands as a fundamental analysis of why the UK economy will continue to weaken and while GBP will be subject to continual raids on its value. Some will be speculative and short term, others will be persistent and quite deliberate.

(see attached diagram covering April/12 to current)

While it's true from a technical perspective sterling is only stronger than the Yen at present, it is still trading in a narrow range along with the rest of the pack.


Relative Strength of Majors

Light Blue = Euro
White = Kiwi
Indigo = Swissy
Yellow US Dollar
Orange = Aussie
Gray = Loonie
Green = Sterling
Red = Yen

 

[Trader333]

Thanks to everyone who has replied, it is always good to get the views of others in an area such as this.

 

[WR1]

The GBP was fine (more or less) until Cameroon told the public of the Referendum to leave Europe
as strong as the Euro and often stronger - then suddenly it all changed during that one wk

you don't need to be a financial analyst to see the UKs deliberately been give a sharp warning NOT to even think of leaving Europe

and a good kicking

the UK is just a very small part of the new world order - it wont ever be allowed to leave, as it has too many assets some still like to call there own

main stream media are either too slow or just wont say somethings going on
just its 8% down when the UKs in the same sorry state its been in for the last 3 yrs

so what changed

 

[kalott]

Soros May Revisit British Pound Short - Business Insider

 

[kalott]

http://www.moodys.com/research/Mood...rnment-bond-rating-to-Aa1-from-Aaa--PR_266844

 

[NVP]

The GBP is almost at the lowest point it has been for the last 52 weeks and in my view will probably crash through the base and continue going down. What are your views on why this is happening and the likely future scenario ?

lowest relative to what ?

N

 

[tar]

Britain's credit rating downgraded from AAA to Aa1 - Telegraph

 

[gfrost]

I have to disagree with most of the previous comments.
I think most of the bad news is already factored into the price, and It seems that everyone is bearish at this point, and that is not a good sign.
I wouldn't want to take a long term bet at this point, but I think if we just get a period where we don't get any more bad news, we could see a bounce.

Monday might be an interesting day

 

[WR1]

I have to disagree with most of the previous comments.
I think most of the bad news is already factored into the price, and It seems that everyone is bearish at this point, and that is not a good sign.
I wouldn't want to take a long term bet at this point, but I think if we just get a period where we don't get any more bad news, we could see a bounce.

Monday might be an interesting day

Makes sense especially as the GBP hit major Wkly support on Thurs
but its in a Monthly aswell as wkly downtrend so could always go lower after abit of shaking out,

and there is still the bigger range with support at approx 1.45
in some part depends on the Euro and US indices, if they continue down
then 1.45 area looks likely

nice of Moody's to kick the UK when they are already down
we can take it they are nt buying all the Tory spin

still does nt seem as though they are getting the message

 

[bbmac]

Hi, ....What do you have as that major weekly support ? Also - no way you could call the Monthly chart in a downtrend by any measure ? - yes it is recently bearish but one of those bearish candles (ie this month's) hasn't closed yet and 2 candles doen't make a trend...more like a b/o of the ascending trend line/ triangle off a fractal HH to what will be when it forms a fractal L on this t/f - and this is not a downtrend.

G/L

Makes sense especially as the GBP hit major Wkly support on Thurs
but its in a Monthly aswell as wkly downtrend so could always go lower after abit of shaking out,

and there is still the bigger range with support at approx 1.45
in some part depends on the Euro and US indices, if they continue down
then 1.45 area looks likely

nice of Moody's to kick the UK when they are already down
we can take it they are nt buying all the Tory spin

still does nt seem as though they are getting the message