Morning all
Main focus today is just GBP.
It appears most of the news channels have done our job for us this morning…this is the worst GBP has been; ever. They say past performance is not a future indicator – it has never been this bad.
GBP
Eeports of a flash crash this morning set firm orders in the market off at around 4am this morning. We have made a slight recovery in the last few hours, however not enough to breathe a sigh of relief. How did this happen? During Asian trading hours there was a huge sell off in GBP on Friday night, during a low liquidity market. Therefore when the market reopened this morning there was a delayed reaction to the selloff on Friday. GBPUSD was not far off parity, with GBPEUR just ahead.
Why are people selling GBP? The rest of the world believe that the UK will be unable to finance its debt burden at a time the Bank of England refuses to raise interest rates to the extent that the market demands. The falling Pound comes alongside rising debt costs in the UK, yields on UK bonds have risen sharply as investors sell these bonds. The selloff in both the currency and bonds follows the announcement by the UK government it would cut taxes at a time when it has significantly boosted spending to cap energy bills for households and businesses.
We personally believe that most of the blame lands on the door of the Bank of England, they are just not at the races! They promised a 0.75% interest rate rise on Thursday, only giving us a 0.5% rise, when the Americans went for a full 0.75%! in short, we were ‘out hiked’ by the US.
This week we can only play it by ear, with GDP figures in the UK released on Friday.
If you have anything to sell against GBP, do it now! If you need to purchase against GBP, drop me a call.
Have a good morning