And so it begins....

WTF?_2

http://news.bbc.co.uk/1/hi/business/7560122.stm

Sterling losses gather momentum

The pound has fallen further against the dollar, hitting its lowest level in almost two years amid fears the UK will fall into recession.

Sterling touched its lowest level since October 2006 at $1.8617.

Measured against a basket of trade-weighted currencies, the pound is now at its weakest level since 1996.
..
Economists had thought inflation would prevent the Bank of England from cutting rates, but the Bank's suggestion that inflation will begin to ease raised expectations of interest rate cuts and this hit the pound.
..
Simon Derrick, currency strategist at Bank of New York Mellon, called pound's fall this week a "dramatic collapse" that recalled the aftermath of sterling's ejection from European Exchange Rate Mechanism (ERM) in 1992.


Bottom line, irrespective of the price of crude oil dropping, we just saw an over 5% price rise in Sterling terms as oil is sold in Dollars.

Hello continued pressure on prices, because interest rates are too low.

harbinger13

I am little happy though - the price of commodity baskets compared with US is getting on parity with UK.

Will it be £1 = $1 soon - if so I got to ask for a hike .

Just wishful thinking.

harbinger13

On a different light - Dollar is being thought of as a new Carry Trade currency; Carry trade - borrow money in a country which has low interest rate, eg US 3-4% charge, convert it to another country which pays higher interest rate, ex Brazil - around 14% and pocket the difference of interests.

£ is not in that category yet - but near as 5% interest rate - 4.4% inflation is equal to .6% - roughly it means £1 earns .06 pence a year [Rough math - does it sound right?]

Sir_Humphrey

This would happen the week before I got to France on my holiday (£ down against the Euro a bit too). :rolleyes:

Good job I got a stash of Euro notes last February!

justpurchased

!!!!!!? wrote: »

http://news.bbc.co.uk/1/hi/business/7560122.stm

Sterling losses gather momentum

The pound has fallen further against the dollar, hitting its lowest level in almost two years amid fears the UK will fall into recession.

Sterling touched its lowest level since October 2006 at $1.8617.

Measured against a basket of trade-weighted currencies, the pound is now at its weakest level since 1996.
..
Economists had thought inflation would prevent the Bank of England from cutting rates, but the Bank's suggestion that inflation will begin to ease raised expectations of interest rate cuts and this hit the pound.
..
Simon Derrick, currency strategist at Bank of New York Mellon, called pound's fall this week a "dramatic collapse" that recalled the aftermath of sterling's ejection from European Exchange Rate Mechanism (ERM) in 1992.


Bottom line, irrespective of the price of crude oil dropping, we just saw an over 5% price rise in Sterling terms as oil is sold in Dollars.

Hello continued pressure on prices, because interest rates are too low.

Sorry i get in the last month we were at peak buying oil at £72.5 Per Barrel
Today it is at current exchange rate at arround £61. It still means oil as fell nearly 16% in real terms to the UK, inflation should come down.
Also .5% up against the $ today, just another scare story. Swings and roundabouts at the moment.
PS oil droping still
http://www.bloomberg.com/energy/

lynzpower

Sir_Humphrey wrote: »

This would happen the week before I got to France on my holiday (£ down against the Euro a bit too). :rolleyes:

Good job I got a stash of Euro notes last February!

my 5thoughts too, that long driving holiday to the US has suddenly got much more expensive _pale_

WTF?_2

justpurchased wrote: »

Sorry i get in the last month we were at peak buying oil at £72.5 Per Barrel
Today it is at current exchange rate at arround £61. It still means oil as fell nearly 16% in real terms to the UK, inflation should come down.
Also .5% up against the $ today, just another scare story. Swings and roundabouts at the moment.
PS oil droping still
http://www.bloomberg.com/energy/

I noted that the price of oil in dollars has fallen. However, the drop in the value of the pound over the last couple of weeks has meant that we're paying more than 5% over what we would otherwise be paying. So we don't see the full benefits of the falls in oil prices.

justpurchased

True but the high exchange rate sheilded us from the increases also, Swings and round abouts mate. As the $ gets stronger oil should drop as the $ should in turn have more value in the contries we buy oil from.

purch

Simon Derrick, currency strategist at Bank of New York Mellon, called pound's fall this week a "dramatic collapse" that recalled the aftermath of sterling's ejection from European Exchange Rate Mechanism (ERM) in 1992

...........thats quite funny.

Obviously the 'currency strategist' doesn't realise that he works for one of the very few Banks that bet against Soros, and GBP having to pull out of the ERM during that remarkable week in September 1992...................cost the Bank of New York a large amount, and a number of their senior bods their careers.

Not a good 'recollection' anyway, as Cable fell 2500 points in less than 10 minutes then evening..................

Dollar is being thought of as a new Carry Trade currency

....then why is the USD getting stronger ?????

harbinger13

purch wrote: »

....then why is the USD getting stronger ?????

Perhaps you are mixing 2 concepts here - Dollar being used as carry trade is one strategy, which will be unwound when the currency starts to appreciate - it is one step after another.

Why Dollar gets stronger - is based on other economic activities; 'the tough talk' by Fed, or the indication to raise interest rates - other currencies failing in front of the Dollar, plenty more.

purch

Perhaps you are mixing 2 concepts here

Nope............:rotfl: ...17 years trading FX in the markets means the concepts are pretty clear

Dollar being used for a carry trade, means borrowing USD and SELLING them....in order to BUY the higher yielding Currency

USD Index rose over 3% last week............hardly a sign that anyone is SELLING the currency

plenty more

Yes.........take a peek at the FEDS (and other CB) currency reserve data from the last few weeks....where has all that currency gone ???