Pound Hits 13-Month High
01/03/11 -- The pound is up above 1.63 against the US dollar for the first time since mid-January 2010 this morning as pundits price in an interest rate rise sooner rather than later.
May or June seems to be a lot of people's favourite once we have an anticipated inflation rate of around 5% plus, from the current 4.7%. Soaring food and fuel prices are seen forcing the BoE's MPC to up base rates from the existing all-time low of 0.5%.
UBS said in a survey that food prices in the UK are rising far more quickly than in other leading global economies. Meanwhile petrol prices are now even higher then when oil reached USD147/barrel in 2008, with now diesel averaging 134.9ppl locally to me (the highest price I recall paying back then was 132.9ppl).
In February the MPC voted 6-3 in favour of leaving rates on hold, more of a split decision than previously, we get to find out the outcome of their March vote next Thursday.
Meanwhile even ABF-owned High Street discount clothing retailer Primark is starting to feel the pinch, saying that the VAT increase had led to a "noticeable" slowing of demand since the turn of the year.
Nationwide say that the housing market is "treading water" with prices up slightly in February, but still fractionally lower than twelve months ago.
On the continemt euro-zone inflation is also up this month, but at 2.4% it's only half of that in the UK.
Pound Jumps On Rate Outlook
18/02/11 -- The pound is up above 1.62 against the dollar and close to 1.1950 against the euro this morning as pundits bet on rising inflation forcing the Bank of England's hand on interest rates sooner rather than later.
High profile (I was going to say shameless self-publicist, but that would be unkind) MPC member Andrew Sentance made comments at a dinner last night that suggested that other committee members were coming round to his way of thinking.
The minutes of this months MPC meeting are out next Wednesday and they will be "more interesting than normal," he apparently said. (He may have been misquoted of course and could have said "more interesting than Norman" - referring to former bushy-eyebrowed Chancellor and boring old fart Norman Lamont).
A report in the Telegraph recently quoted two former MPC members as saying that they would have voted for a rate increase themselves last week if they were still on the committee. It seems that last week's unchanged vote may have been more of a split decision than previous ones.
You can follow the pound tick by tick on the stunningly excellent Grainportal.com, which is where the chart pictured comes from.
Pound Climbs On Rate Outlook
02/02/11 -- The pound has climbed to it's best levels in almost three months, and close to a one year high against the dollar this morning on renewed ideas that an interest rate hike might be on the cards by mid-2011.
News out yesterday that British manufacturing grew at the fastest pace on record in January surprised the market, so too did construction data out this morning.
Meanwhile the spectre of rising inflation is still lurking in the background. BoE Deputy Mr Bean has added to arch-hawk Andrew Sentance's stance, saying that further rises in commodity prices and inflation might eventually force the MCP's hand into raising interest rates.
Meanwhile in the States the mixture of a Democrat controlled Senate and a Republican controlled House of Representatives could make a concerted effort on tackling US government debt (currently USD14 trillion and rising) rather tricky to push through.
The US looks set to hit it's statutorily imposed debt limit of USD14.3 trillion pretty soon. When it does it either needs to raise that ceiling even higher or introduce some painful spending cuts and austerity measures of its own. Cue much squabbling and back-stabbing and an ensuing period of dollar-bashing.
It's Half Past Double Dip Recession O'Clock
25/01/11 -- The pound fell sharply in early trade following the shock news that UK GDP fell 0.5% in the last quarter of 2010, contrary to expectations of an increase by a similar amount.
It's all the weather's fault. The sudden arrival of heavy snow and sub-zero temperatures is largely to blame, how very British.
"This really isn't our fault. We inherited a lot of snow and ice from the previous reckless Labour administration," said David Cameron. Probably.
Prices rising and growth falling, what does the Bank of England do now? Fire up the Thomas Caxton and order more ink?
The pound dropped below 1.58 against the dollar shortly after the news and fell to not much more than 1.16 against a suddenly popular euro.
Is There Any Way Out For The Pound?
29/12/10 -- The outlook for commodity prices here in the new year will be heavily influenced by the fortunes, or lack of them, of the pound. From where I am standing the immediate prospects don't look too bright.
Whilst the dollar and euro themselves are hardly shining beacons of strength, the prospects for sterling as we enter the new year look even bleaker.
Currently standing at around 1.5375 against the dollar, the pound is at three and a half month low against the greenback and stands perilously close to slipping below 1.53 to levels not seen since July.
We have unemployment now rising rapidly, with the Chartered Institute of Personnel and Development saying that 2.7 million people will be out of work before the end 2011, the highest jobless total in 17 years. That's almost one in ten of the working population on the dole as the government's enforced austerity measures start to bite.
Hefty job losses in the public sector will lead the way, combined with strikes and other social discontent as demonstrated by the nation's great unwashed recently, 2011 looks set to be a year of unrest.
Meanwhile house prices are forecast to fall as much as 10 percent next year as spending cuts and unemployment bites, along with continued tightness in the lending market.
Food prices are rising too, as we all know in this industry, and that rate of growth is only likely to accelerate given the current outlook for feed and fuel prices. Then, on top of that little lot, we have the impending VAT increase now just days away.
All of this points to significantly reduced consumer spending. The TV people can always manage to find video footage of shoppers breaking down the doors of Harvey Nicks desperate to flash the plastic on Boxing Day, but the evidence of my own eyes tells me that High Street spending has been depressed this Christmas. And I don't believe that it's all down to the weather.
Even if most of it is, retail sales figures are likely to disappoint when all the till receipts are added up in January. As the VAT increase kicks in and people become more concerned about their jobs and find a larger slice of their salaries going on food and utility bills, consumers are going to be tightening their belts in 2011.
That paints a pretty bleak picture for the UK economy, and maybe sets the tone for an enforced continuation of the existing loose fiscal policy, low interest rates and perhaps even more QE.
All of that points to further sterling depreciation ahead, especially against the likes of the Aussie Dollar, Asian currencies in general, the Swiss Franc etc where their economies are positively booming relative to our own.
A more modest decrease, but a decrease nevertheless, seems likely against the euro and US dollar too I'd say.
Forex Markets
24/11/10 -- The pound has hit it's best levels against a beleaguered euro since September 21st, pressing above 1.1850 this morning. It's more to do with euro weakness than sterling strength it seems. UK Q3 GDP data came in as expected this morning, showing growth of 0.8%.
The euro is under pressure again ahead of Ireland's expected announcement detailing how it intends to cut it's deficit. The Irish government looks set to take a majority stake in the Bank of Ireland, the only major bank that they had left independent of state control.
All eyes are now on Portugal too, where a national strike is organised for today, and of course Spain.
It seems likely that further euro depreciation lies ahead.
The pound is down against the US dollar meanwhile, touching 1.5740, it's lowest in almost a month. The US unit is benefiting from a flight to safety as the situation in Asia threatens to, well Korea out of control you might say. There's nothing quite so distasteful as a despot with nepotism is there?
Another Big Week For The Pound
25/10/10 -- The pound is set for another big week, with tomorrow bringing the release of the latest set of GDP figures, this time for Q3.
The vibe is that these could show a significant decline from growth of 1.2 percent in Q2 to more like 0.4 percent, giving more ammunition to those on the Bank of England's MPC that want to see QE2 launched sooner rather than later.
MPC member Adam Posen voted to increase QE by GBP50 to GBP250 billion, according to the minutes of last month's meeting.
The pound is currently flirting either side of 1.12 against the euro, having plumbed as low as 1.1188 this morning, it's lowest since late March.
Big Week For The Pound
18/10/10 -- Or should that be a big weak for the pound? New Chancellor George Osborne gets the unenviable task of outlining exactly what spending cuts are in store to tackle our record GBP156 billion budget deficit on Wednesday.
It could be a case of be damned if you do, or be damned if you don't for Georgie boy.
If he hits us with a full in the face raft of austerity measures then the pound could come under some pressure.
On the other hand any delay in tackling the thorny problem, and not introducing enough spending cuts, could also be viewed as dragging the recession on for longer, which could also undermine sterling.
Pound Falls On BOE Minutes
Minutes from the Bank of England's last MPC meeting released at 9.30am this morning reveal that the lumbering economy might make it necessary to increase QE further.
The committee voted 8-1 to keep interest rates on hold, with Andrew Sentance wanting a 0.25% increase to 0.75%. He's concerned that inflation is consistently running too high.
The rest of the MPC however seem to quite fancy getting the old Thomas Caxton out and rattling off a few more twenties.
It they go down that route, possibly with the US too - in what one newswire is wittily referring to as "jumping on board the good ship QE2" - that's going to make inflation worse not better.
The US are better placed to withstand a bit of inflation than we are, potentially putting sterling at the head of the firing line to become the latest currency market whipping boy.
One Step Forward, Two Steps Back
UK inflation remained unchanged at 3.1% in August. That's more than was expected and well above the BOE's target of 2%, and means that poor old Mervyn "the swerve" King has to get his pen and paper out to say sorry to the Chancellor for the eighth month in a row.
Rising food prices was one of the reasons that inflation refused to come down, and certainly from that perspective I wouldn't be expecting a significant shift back towards the 2% target any time soon.
That could be construed as bullish for sterling as it may mean an interest rate hike sooner than the market has been expecting.
That got the pound back on the road to recovery, after an early slump following news that house prices fell to their lowest levels for 15 months in August.
That lent weight to some fears that the dreaded "double-dip" recession might still be on the cards for the UK and it's magic money printing machine.
We're down against the euro on talk that strong economic growth in Germany will help the euro-zone as a whole. The euro is also up to a two month high against the dollar on euro-zone growth optimism, that might weigh on Paris grains today.
Pound Rises On Hot Air
The pound rose above 1.51 against the dollar for the first time since early May after new chancellor George Osborne said that the government's austerity budget had full support from G20 leaders at their weekend meeting.
The pound also rose to a 1 1/2 year high of 1.2255 against the euro.
BoE MPC member Andrew Sentance was quoted as saying that UK interest rates now needed to gradually increase, and that the bank now needs to begin "withdrawing slightly some of the monetary stimulus we provided over the last 12-18 months."
Better than expected data on US consumer spending also boosted market sentiment.
Pound Jumps Ahead Of England Game
The pound is up this morning in anticipation that thousands of England fans, currently away from home supporting the African economy, will be returning to these shores by the weekend before indulging in a massive drinking spree shovelling billions across the bars of the nation.
Meanwhile, the three of us who remained at home will be rushing into town at lunchtime to buy the last of the XL replica shirts and snap up a few more flags for the roof of the car. JJB Sports have laid on extra staff to cope with the expected surge in demand, whilst Bargain Booze have stocked up on extra strong lager in a move that is seen potentially wiping out the national debt in one swift afternoon.
Meanwhile the minutes of the BoE's MPC meeting earlier this month showed a unanimous vote to maintain QE at GBP200 billion. Yesterday's "not as austere as it might have been" Budget seems to be getting the thumbs up from the city too.
Three Loins On My Shirt:
BOE Leaves UK Rates On Hold
In a move that shocked nobody the Bank of England left UK interest rates on hold at 0.5% today. The pound rose to an intra day high of 1.2147 against the euro just after the decision was announced, close to it's best levels against the single currency since November 2008 set earlier in the week.
Feeling Nervous?
I am. EU finance ministers have announced a "put it all on red" EUR750 billion facility (on top of the EUR110 billion already allocated to Greece) to help indebted eurozone member countries.
It sounds like a lot doesn't it EUR750 billion? Although the Spanish probably need half of that on their own, and then there's still the rest of the PIIGS to muck out.
All of which beggars the question: who is going to be there to bail us out?
The one thing the Greeks and Spanish do have going for them is that they are members of a sixteen strong gang. Poor old GB is on it's lonesome, currently unable to even agree on who is in charge to think about how to tackle our huge budget deficit.
The euro seems to be off the hook for now, but you can be sure that the sharks will be circling looking for their next easy victim, and I'd say that we seem to fit the bill rather nicely.
Pound Dips Below 1.52 Against US Dollar
A nervous sterling has dipped below 1.52 against the dollar in early trade with just a couple of days left to go to this week's election.
Poll results generally seem to point to a hung parliament, although one in the Telegraph appears to indicate an outright Tory victory.
As well as pre-election uncertainty we have data due later today on UK manufacturing, money supply, UK consumer confidence and mortgage approvals.
Looks like we could be in for a roller coaster week.
Sterling And Euro Slide As Greek Tragedy Unfolds
The pound and euro are under pressure again this morning as the magnitude of Greece's debt tragedy unfold, with Portugal waiting in the wings about to also seemingly take to the stage.
It's not like we haven't known about these things for months is it, it's the size of the problem that hasn't been made entirely clear. When you go to the bank for a last ditch loan, you don't tell them that all your credit cards are up to the max and the bailiffs arrive tomorrow anyway do you?
The spotlight has again been cast on sterling, trying to hide behind the stage curtain. How will Britain sort it's debt problems out? Is there a plan? And if there is who is going to be in charge to implement it?
The sudden surge in popularity of the Lib-Dems appears to make a hung parliament seem more than likely next week. Even Mr Popular Nick Clegg now seems to be squirming under the spotlight when asked for a direct answer to a direct "will you only get into bed with Labour if the one-eyed Jock gets the boot?"
"Erm, well let's mutter something about kingmakers, that will get everyone confused. Who are the kingmakers? You are the kingmakers. Those bad people over there aren't the kingmakers. Right, that's cleared that up then. Next question?"
With muppets like this in charge it's hardly surprising that confidence is waning is it? If it was a play I'd have left by now.
The pound is down to 1.5170 against the dollar this morning, it's lowest since April 8th.
Meanwhile in Europe we've gone from a situation of banks not lending to the public sector, to them also not lending to the private sector, to them now not even wanting to lend to fellow European countries.
As per usual the US dollar is one of the main beneficiaries of this latest flight to safety. The Fed are widely expected to leave rates on hold later today, but accompanying upbeat comments from Ben Bernanke over a rosy outlook for the US economy could strengthen the dollar further.
It isn't hard to envisage more dollar appreciation against both the pound and sterling in the weeks ahead that's for sure.
Pound Declines On Polls, Volatile Week Ahead
The pound is sharply lower after another raft of weekend opinion polls showed an improved showing from the Lib Dems.
Despite assertions from David Cameron and Gordon Brown over the weekend that the leadership fight is a two horse race (which it probably is), an improved performance by Nick Clegg increases the chance of a hung parliament.
Although the leaders of the main two parties might really believe that it is a two horse race, they both seemed to go out of their way in Thursday night's televised debate to attempt to get Clegg onside, just in case. Maybe what you might call a two and a half horse race.
Another unsettling factor today is the news that Goldman Sachs are facing fraud charges in the US, and are also under scrutiny in the UK and Germany.
It could be another volatile week ahead for sterling, with an assortment of data due out over the coming days.
The minutes of the April meeting of the Bank of England’s Monetary Policy Committee are due this week, but it seems highly unlikely that they will throw up any surprises in the run up to an election.
Likely to be of more significance are inflation figures tomorrow, unemployment data on Wednesday and government borrowing & retail sales figures on Thursday. After that on Friday we have the first estimate of the first quarter gross domestic product figures.
Pound Goosed - Soros
I was putting the bins out earlier and stopped for a chat with our local "refuse relocation operative" Frank, Frankie Soros is his name. He's a nice bloke Frank, always whistling he is, who frequently stops for a chat usually about next doors cat and what he'd like to do to it. Sometimes about those bloody scumbags at number 37 with their broken down Sierra and that big Alsatian.
Today however, Frank broached the altogether more complex and diverse issue of the pound. To his way of thinking a Greek deal incorporating coordinated bilateral loans from its euro zone partners, with IMF assistance waiting in the wings should it be required, should be sufficient to quell the recent euro weakness.
An interesting viewpoint Frankie, I ventured, but er watch that bag mate it's dripping, I helpfully observed.
Undeterred, Frankie continued to press home his point. Although the inclusion of the IMF might be seen by some tarnishing the credibility of eurozone unity, their involvement should provide some stability in the market and help stimulate fiscal reconstruction, he opined.
Indeed, given that the pound had only managed to claw it's way back up to 1.12 against the beleaguered single currency, merely back to a level at where we started 2010, Frankie ventured that a run on a vulnerable looking sterling was his next major concern.
What awaits the pound now in the run-up to an election against a backdrop of strikes and political gesticulation and back-stabbing, especially against a resurgent US dollar, he asked.
He went on to assert that this mornings break below the 1.4850 Fibonacci support level suggests an attempt to test the 1.4400 22nd April 2009 lows against the greenback. At least he said that was the way he has restructured his portfolio once the Far East opened in the early hours, before heading off to the local council depot for the 6am shift, and he strongly suggested that I should do the same.
Some interesting and valid viewpoints there from Frankie. Next week Frankie Soros - "the whistling binman" - will talk us through his key analysis of the USDA planting intentions and quarterly stocks data.
UK Inflation Falls To 3 Percent
UK annual inflation fell to 3 percent in February, from 3.5 percent in January, and slightly lower than the 3.1 percent the market had been expecting.
The Bank of England said last month that “inflation is likely to remain significantly above the 2% target in the near term, reflecting the continuing impact of sterling’s depreciation and the restoration of the VAT rate to 17.5%."
"These factors should have only a temporary effect on inflation," they added, talking their own book.
The currency markets were relatively unmoved by this slightly better result, following last week's warnings of a double dip risk from MPC member Andrew Sentence, with the pound holding a little above USD1.50 for now.
Step into the limelight Alistair Darling. Our half albino, half caterpillar Chancellor will open up his magic handbag of tricks tomorrow. The pound could be in for a volatile day.
Who's putting their money with me on ruthless pre-election inaction? Doing not a lot really might put the pound back under a bit of pressure.
Big Week Ahead In The Currency Markets
Having dipped below the 1.50 mark against the dollar again this morning, the pound looks like it's in for another volatile week.
Monthly inflation figures are due to be published tomorrow, with analysts expecting the consumer prices index (CPI) to have eased back to 3.1% for February after hitting 3.5% in January.
The increase, up from 2.9% in December and a low of 1.1% last autumn, was driven in part because of the end of lower VAT.
The Bank of England's government-set target for inflation is 2%. The Bank say that they expect things to dip back to this kind of level later in the year.
If they don't the the BoE may ultimately have to consider raising rates in order to meet its target.
We have the budget to look forward to on Wednesday, where the caterpillar eyebrowed one will outline exactly how he's going to cut borrowing, and pay back some of what we already owe. Of course in the run up to an election he's got a bit of a tightrope walk to do.
Greece is finally likely to be told politely but firmly to "do one" by EU minsters meeting at their summit on Thursday/Friday, before getting straight onto their mobile phone to the IMF.
We can probably therefore expect both the pound and euro to come under pressure as the week progresses.
