The Pound Sinks Further

worldtraveller

1.4296 at 05:00 today, but has since recovered to 1.4340.

RDB

Its a race to the bottom which country can devalue their currency the most to reduce their debt without causing a currency crisis.

N9eav

Nor much good for my US holiday.....:mad:

inspector_monkfish

just spiked back up to 1.4445

inspector_monkfish

09:37 18May10-GBP/USD: Knee-Jerk Rise on Above-Forecast UK CPI Inflation

LONDON, May 18

Cable leapt by over a quarter-cent to a fresh intra-day peak of 1.4522 in
a knee-jerk reaction to April"s higher-than-expected 3.7% annualized UK CPI
inflation number. It was forecast at 3.5%.

The above-consensus CPI number is a boost for the recently diminishing band of hawks calling for a Bank Rate hike before year-end. Last Wednesday"s dovish BoE Inflation Report suggests Bank Rate could be held at 0.5% until 2011, if not 2012.

GBP/USD buy stops are tipped above 1.4525. Bull targets beyond this level
include 1.4545 (yesterday"s peak, scaled in early Asian trade) and 1.4600. A
1.4600 option strike rolls off at today"s 10am ET NY cut (14:00GMT).

A letter from BoE Governor King to UK Chancellor Osborne re: why UK CPI is
above 3.0% is expected at 10:30.

lemonjelly

Seems to be some funny stuff (for that read stuff I just simply cannot hope to comprehend) going on with the currency markets.

I assume that they will generally hover around where they are currently, until Georgie Porgie announces his scorched earth policy? Then we'll go on the roller-coaster...

Generali

The reason for the Pound falling IMO is on the belief that this Government is going to cut spending while trying to maintain low base rates.

The reason that this is negative for Sterling is the opposite to what I have said a few times about why Governments borrowing big is bad for the rest of the economy, that is crowding out.

If a Government borrows a pound, it can't be lent to someone else. As the Government is the safest bet in town, any private borrower has to pay a higher rate of interest than the Government to borrow. The more the Government borrows, the more interest rates are pushed up.

Then of course the reverse is true. If the Government borrows less, market interest rates should fall. If interest rates fall, the currency falls.

The market reaction is down to a perceived change in the balance between supply and demand, not a vote of (no) confidence in the Government or their policies.

worldtraveller

Under pressure again, currently at 1.4335

Exocet

inspector_monkfish wrote: »

A letter from BoE Governor King to UK Chancellor Osborne re: why UK CPI is
above 3.0% is expected at 10:30.

Dear George,

as agreed at last weeks party at Oxford (I woke up the next day with a hell of a hangover), we are on track to inflate some of the debt away. I've told the MPC members that if any of them start making noises off about raising interest rates then any chance of a peerage has gone. So all set for RPI about 6% by the end of the year, although obviously we can hide a bit of that, and should make a good contribution towards tidying up the deficit.

Attached is the 'real' draft letter for publication to the press, you can edit as you wish,

all the best,

Mervyn.

fc123

Help....IM, Gen and others. I need to know about this.

I have an impt meet on Thursday and I have already had some issues with price points due to increased costs.....it is to USA and I price in sterling, he then pays me from US so the better exchange could cushion the cost to him.
He's a shrewd sort so I need a polite but informed sentence to say ''well, prices have gone up a bit but we can't not pass them on...but, of course *in a knowledgeable tone* I can say the price rise can be cancelled out by the drop in sterling as ...the I could quote Gen...

The reason for the Pound falling IMO is on the belief that this Government is going to cut spending while trying to maintain low base rates.

The reason that this is negative for Sterling is the opposite to what I have said a few times about why Governments borrowing big is bad for the rest of the economy, that is crowding out.

If a Government borrows a pound, it can't be lent to someone else. As the Government is the safest bet in town, any private borrower has to pay a higher rate of interest than the Government to borrow. The more the Government borrows, the more interest rates are pushed up.

Then of course the reverse is true. If the Government borrows less, market interest rates should fall. If interest rates fall, the currency falls.

The market reaction is down to a perceived change in the balance between supply and demand, not a vote of (no) confidence in the Government or their policies.

But.......I have to understand what I am saying so, much as I would love to scribble Gens post up my arm under my sleeve and read it out, I can't as I will get caught out.

I kind of get it........I can say the following as I understand it inside out

''' sterling will stay low as our Govt are going to cut public spending to reduce the deficit but keep IR low...hence the pound will stay low for as long as this continues.......and, so our inflationary small rise in cost price to you will be offset against this'' Therefore his margin and US price points will remain the same.

Help