Does the strength of Sterling reflect Britain's economic strength?

Generali

michaels wrote: »

Portfolio theory would suggest that expected risk adjusted returns in all currencies should be equal, returns being the amalgamation of interest and capital changes.

Write it out 100 times michaels.

vivatifosi

I'd like to see a longer term graph. I've been going to the States and changing money for 25 years and the dollar has traded in the same range of c$1.40-2.00ish all of that time as far as I am aware, generally being around $1.60ish. If it dropped dramatically, to say $1.30, then that would be concerning.

I'd also like to see whether cyclically the pound tends to do worse in January... reason being I have to pay a large bill in dollars this time every year and the dollar always seems to fall now, meaning paying through gritted teeth.

Just my observations as a non city person. Would love to know if the hold water.

Generali

vivatifosi wrote: »

I'd like to see a longer term graph. I've been going to the States and changing money for 25 years and the dollar has traded in the same range of c$1.40-2.00ish all of that time as far as I am aware, generally being around $1.60ish. If it dropped dramatically, to say $1.30, then that would be concerning.

I'd also like to see whether cyclically the pound tends to do worse in January... reason being I have to pay a large bill in dollars this time every year and the dollar always seems to fall now, meaning paying through gritted teeth.

Just my observations as a non city person. Would love to know if the hold water.

It shouldn't be possible for your cyclical theory to hold water. If cable (£/$ FX rate) moved in that predictable way, people like me would short the Pound in December so the fall would get ever earlier.

Having said that there is some emprical evidence that some of these old saws are true. Sell in May and go away, come back on St Ledgers Day apparently lets you overperform for example. Markets tend to do well in Dec and Jan (this year is the exception that proves the rule) apparently and house prices in the UK do much better Jan - June than July - Dec.

mwpt

Generali wrote: »

house prices in the UK do much better Jan - June than July - Dec.

I have friends trying to buy at the moment and for them house prices are doing much worse at the moment, they're becoming more expensive.

My gas bills should be doing much better shortly though, getting cheaper.

purch

Jon_B wrote: »

Sterling was priced in for an interest rise because Carney.

Now it looks improbable in 2016 it's taking a turn.

Not exactly.

FX markets are immediate, and therefore do not price in future events in that way.

GBP is currently weakening because the general consensus in the market is that interest rates should be higher relative to the UK economy, which is therefore a negative.

The same could happen, and often used to happen when interest rates were set at a level too high for the overall economy, which in turn became negative for the relative value of GBP.

FX markets do not just hunt around for the highest interest rate yield. it is far more complex a relationship.

Generali

mwpt wrote: »

I have friends trying to buy at the moment and for them house prices are doing much worse at the moment, they're becoming more expensive.

My gas bills should be doing much better shortly though, getting cheaper.

It's a fair cop. I don't own a house either and plan to this year or next and so should know better.

In my defence, it's a commonly used shorthand.

mwpt

Generali wrote: »

It's a fair cop. I don't own a house either and plan to this year or next and so should know better.

In my defence, it's a commonly used shorthand.

Yup, I know, sorry. I was just being pernickety.

All good