So I get to pay out on the evens bet last week. Shame, but no real surprise. Nice to be right two weeks running though. There were some familiar factors involved:
Sixth time unlucky
Last week I pointed out that this was the sixth time that Sterling has poked its head up above the 1.20 level in the past three years, and of course on each of the previous five occasions it fell back, sometimes sharply. And here we are again, back at 1.1800.
Greece to the rescue
An unlikely headline, at best, but that in effect is what happened for the Euro last week. The Greek government took it upon themselves to sign away even more of the ordinary Greek-in-the-street's ability to cope on a day to day basis. To be fair, the alternative is even less attractive in substance, even though it might be difficult to persuade the public of that fact. To rub salt in the wound, the EU, IMF and ECB also demanded, and got, a monitoring post in Athens so that they can keep an eye on things. Well I for one hope that the building they choose isn't too flammable, and I wouldn't be too happy if I were a German accountant given the Athens posting. ECB president Mario Draghi chipped in, saying that 'backtracking on fiscal targets would elicit an immediate reaction by the market'. Go Mario.
Under Sentance of Debt
Actually I can spell, usually. This is Andrew Sentance, who until last year was one of Merv's Merry Men. His gloomy forecast this week was that the UK will continue to struggle with poor growth and sporadic phases of recovery until at least 2016. He anticipates annual growth of 1% or less per year until then.
MMM
Talking of Merv and his crew, they also managed to contribute to sterling's relapse this week, with the release of the last Bank of England minutes to the decision two weeks ago to keep interest rates on hold. During that meeting the decision was taken to issue another £50bn of QE, and that was taken favourably by the market at the time. In the minutes it was revealed that two members of the committee wanted even more money pumped into the economy than the £50bn. The two voted for a £75bn slab of QE, but the other seven went for £50bn. The reason this has caused a problem for sterling is that the market had assumed that the decision would have been unanimous, and that recent good economic data would mean that we could put the printer away now. It now appears however that the door is still open for even more QE in the future, and this has helped weaken sterling as increasing the amount of currency in the system must inevitably devalue it.
So what now?
Doldrums time again for a while I'm afraid, until we either get more clear signals on the UK economy, or Greece kicks off again, as it surely will. I firmly believe that we will see 1.200 again soon, and sometime soon we're going to breach that level and stay there, but not just yet. Mid 1.1800's for me this week.
Saturday, February 25, 2012
Saturday, February 18, 2012
F/X Weekly Comment
Whew! Got one right last week. I was beginning to forget what that felt like, but here we are, as predicted, back in the 1.20s, in fact at 1.2050 at close of play on Friday. Greece was again a factor, but to be honest I'm getting a bit bored of the attention being heaped on by far the smallest of the PIIG economies. Press and pundits seem less bored though, and determined to keep it in the news, so:
More Greek Woes
The euro was again under the cosh this week as the market concentrated on the news regarding the second Greek bailout. Deadlines came and went throughout the week, and a meeting scheduled for European finance chiefs on Wednesday, during which the deal was to have been finalised, was postponed until Monday due to German (and others) concerns that the Greek’s proposed austerity package didn't come with the required guarantee that the measures would actually be pushed through. A case of 'talk is expensive'. Ominously for Greece, a statement was also issued saying that 'further considerations are necessary'.
Moody Blues for Europe
No, not another comeback tour, but another ratings agency 'strutting its stuff'. This week Moody’s cut the debt ratings of six European countries including Italy, Spain and Portugal whilst placing France, Austria and ,oh yes, the UK on a negative outlook. They did however leave the European Financial Stability Facility’s AAA rating alone. (Why?)
Meanwhile Back 'Home'
The market had the unusual task of assimilating some good news for Sterling. The CBI came out with a bullish statement forecasting that the UK will avoid a double dip recession and that the recovery will gain momentum during the year. This was presumably based partly on the release of better than anticipated UK Retail Sales data for January. The annualised figure was posted at +2.0% versus expectations of a growth in shop sales of only 0.6%, raising investor’s expectations that the Bank of England will have to raise British interest rates sooner rather than later. Strange really, as only on Tuesday the headlines were that the sterling base rate would remain unchanged for at least two more years! The pound was also benefitting from the fact that only £50bn (only?) was issued last week instead of £75bn.
What now?
Well, this is now the sixth time that Sterling has poked its head up above the 1.20 level in the past three years, and of course on each of the previous five occasions it fell back, sometimes sharply. Last time though it only fell back into the 1.18's, and then only for a short time. Can this be sixth time lucky?
Bored of new from Greece I might be, but it will be Greek news that dictates which way Sterling goes from here. If a deal is reached on Monday, and Greece's gonads are wrung even tighter, the chances are that the Euro will strengthen and the rate will fall back again. If however, and this is possible, the Greek politicians decide that if they give any more ground it will be their gonads on the line, not the public's, we could have a very messy week indeed.
On balance, I think a deal will be struck. As the Dutch PM said this week 'It's cheaper to bail Greece out than to let it default'. I can see what he means, but Greece will default, by any reasonable description, whatever happens. The choice is between orderly default, with debtors agreeing to write off debt, and disorderly default, where the Greeks just decide they can't repay.
So I'll give you two prices this week, with betting odds:
1.2450 by next Friday 8/1
1.1825 by next Friday Evens
You can tell I've been to Monaco, can't you?
More Greek Woes
The euro was again under the cosh this week as the market concentrated on the news regarding the second Greek bailout. Deadlines came and went throughout the week, and a meeting scheduled for European finance chiefs on Wednesday, during which the deal was to have been finalised, was postponed until Monday due to German (and others) concerns that the Greek’s proposed austerity package didn't come with the required guarantee that the measures would actually be pushed through. A case of 'talk is expensive'. Ominously for Greece, a statement was also issued saying that 'further considerations are necessary'.
Moody Blues for Europe
No, not another comeback tour, but another ratings agency 'strutting its stuff'. This week Moody’s cut the debt ratings of six European countries including Italy, Spain and Portugal whilst placing France, Austria and ,oh yes, the UK on a negative outlook. They did however leave the European Financial Stability Facility’s AAA rating alone. (Why?)
Meanwhile Back 'Home'
The market had the unusual task of assimilating some good news for Sterling. The CBI came out with a bullish statement forecasting that the UK will avoid a double dip recession and that the recovery will gain momentum during the year. This was presumably based partly on the release of better than anticipated UK Retail Sales data for January. The annualised figure was posted at +2.0% versus expectations of a growth in shop sales of only 0.6%, raising investor’s expectations that the Bank of England will have to raise British interest rates sooner rather than later. Strange really, as only on Tuesday the headlines were that the sterling base rate would remain unchanged for at least two more years! The pound was also benefitting from the fact that only £50bn (only?) was issued last week instead of £75bn.
What now?
Well, this is now the sixth time that Sterling has poked its head up above the 1.20 level in the past three years, and of course on each of the previous five occasions it fell back, sometimes sharply. Last time though it only fell back into the 1.18's, and then only for a short time. Can this be sixth time lucky?
Bored of new from Greece I might be, but it will be Greek news that dictates which way Sterling goes from here. If a deal is reached on Monday, and Greece's gonads are wrung even tighter, the chances are that the Euro will strengthen and the rate will fall back again. If however, and this is possible, the Greek politicians decide that if they give any more ground it will be their gonads on the line, not the public's, we could have a very messy week indeed.
On balance, I think a deal will be struck. As the Dutch PM said this week 'It's cheaper to bail Greece out than to let it default'. I can see what he means, but Greece will default, by any reasonable description, whatever happens. The choice is between orderly default, with debtors agreeing to write off debt, and disorderly default, where the Greeks just decide they can't repay.
So I'll give you two prices this week, with betting odds:
1.2450 by next Friday 8/1
1.1825 by next Friday Evens
You can tell I've been to Monaco, can't you?
Sunday, February 12, 2012
F/X weekly comment
Not a vast amount to report this week in terms of currency movement. We've ended up a centime down on the week at 1.1950. To me this feels a bit like a lull before a big storm. Interest rates in both the UK and Euroland were kept on hold again, but the BoE came in with a new slug of QE, more on that below. The big story though, not for the first time this year:
Greece is still the word...
Caught between a rock and a hard place, it's difficult not to feel some degree of sympathy for the Greeks this week. No? OK, it is difficult. They desperately need more EU money, but first they've got to prove that they will make at least some attempt to pay (a bit) of it back, and they're struggling. They thought they'd come up with a decent new austerity package this week, but those stern nasty Germans weren't impressed, and they were sent packing to drum up some more riot-fodder. As I write this, on Friday evening (10th Feb), a headline has just burst onto my computer screen:
Marilisa Xenogiannakopoulou
I wouldn't bother even trying to annunciate it, and no it's not the Greek version of countdown, it is in fact the name of the fourth Greek government minister to resign today in protest over the debt negotiations. Yes, today. Giving a flavour of current sentiment, George Karatzaferis, a coalition party leader said, "Greece must not and cannot be outside the EU. But it can do without the German boot." Unfortunately the German boot is in fairly close proximity to the German hand that is shelling out most of the money.
Back in Blighty...
Some decent figures out this week, and an expected old friend reared his head in the form of another tranche of QE (Money printing to you and me). Now the theory goes that QE doesn't mean higher inflation, but personally I'll take more convincing than I've seen so far. Another £50bn chucked into the system this week would have hurt sterling even more, but the market was quite relieved that it wasn't the £75 bn that they'd been expecting.
More on Greece...
Update Sunday pm. The austerity cuts include under discussion now include:
• Another 15,000 public-sector job cuts
• liberalisation of labour laws (hire and fire)
• lowering the minimum wage by 20% from 751 euros a month to 600 euros
These were presented to a eurozone ministers in Brussels, but were rejected unless a further €325m in savings for this year are promised, and the Greek leaders give "strong political assurances" on the implementation of all of the packages. Unions are holding a 48-hour strike, and thousands of protesters are rallied in central Athens against the measures. Riot police are on standby. Watch this space.
What now?
Back to guesswork in the short term, so back into the 1.200s next week for me...
Greece is still the word...
Caught between a rock and a hard place, it's difficult not to feel some degree of sympathy for the Greeks this week. No? OK, it is difficult. They desperately need more EU money, but first they've got to prove that they will make at least some attempt to pay (a bit) of it back, and they're struggling. They thought they'd come up with a decent new austerity package this week, but those stern nasty Germans weren't impressed, and they were sent packing to drum up some more riot-fodder. As I write this, on Friday evening (10th Feb), a headline has just burst onto my computer screen:
Marilisa Xenogiannakopoulou
I wouldn't bother even trying to annunciate it, and no it's not the Greek version of countdown, it is in fact the name of the fourth Greek government minister to resign today in protest over the debt negotiations. Yes, today. Giving a flavour of current sentiment, George Karatzaferis, a coalition party leader said, "Greece must not and cannot be outside the EU. But it can do without the German boot." Unfortunately the German boot is in fairly close proximity to the German hand that is shelling out most of the money.
Back in Blighty...
Some decent figures out this week, and an expected old friend reared his head in the form of another tranche of QE (Money printing to you and me). Now the theory goes that QE doesn't mean higher inflation, but personally I'll take more convincing than I've seen so far. Another £50bn chucked into the system this week would have hurt sterling even more, but the market was quite relieved that it wasn't the £75 bn that they'd been expecting.
More on Greece...
Update Sunday pm. The austerity cuts include under discussion now include:
• Another 15,000 public-sector job cuts
• liberalisation of labour laws (hire and fire)
• lowering the minimum wage by 20% from 751 euros a month to 600 euros
These were presented to a eurozone ministers in Brussels, but were rejected unless a further €325m in savings for this year are promised, and the Greek leaders give "strong political assurances" on the implementation of all of the packages. Unions are holding a 48-hour strike, and thousands of protesters are rallied in central Athens against the measures. Riot police are on standby. Watch this space.
What now?
Back to guesswork in the short term, so back into the 1.200s next week for me...
Friday, February 3, 2012
F/X weekly comment
Two weeks on from my last blog on the single currency duel with sterling. Two weeks on, and precious little has changed, in fact the rate has moved by just 10 centimes, ending this week at 1.2050. A bit like my two weeks really, here I am in exactly the same place, but in the intervening period I found myself mixing with it the high-rollers in Monte Carlo. I didn't make my fortune though, and like sterling I'm back down at square one, if you can call it that (what would you call 1.05 then?). So what will change things from here?
The continuing story of Greece....
More like a soap really. How long can this drag on for? We were promised that a full resolution to the Greek debt problem would be in place by, let me see, which date shall we choose? Anyway, the latest promise is Monday. Dream on. Apparently there will be announcements on three issues. Firstly, the size of the haircut that private investors must take on their holdings (in addition to what hit the ECB will take). Secondly, the size of yet another bailout (MK111), which is going to have to be somewhere in the region of €130bn, and lastly another tranche of austerity measures announced by the Greek government for the Greek public to welcome with open arms.
A sideshow from Portugal...
Another fairly dismal round of bond refinancing during the week reminded the markets that Greece isn't where all the action is. In fact there is fun to be had wherever you look in southern Europe, if you like that sort of thing.
Can the UK and sterling capitalise on all of this?
Do bears defecate in Milton Keynes? Is the pope a Mormon? No, of course not. The latest apology for sterling is of course that we need the EU debt problem resolved quickly and positively in order to reassure the markets that the UK economy will not suffer. Lord preserve us from procrastinating apologists disguised as economists. Are we to believe that sterling is now inextricably tied in to a range between 1.0500 and 1.2050 against the lumbering school bully that is the Euro?
What now?
Maybe I should go and lie down for a while. Maybe then I'll wake up and the world will have come to its senses. Newt Gingrich will be US President, Greece will be the only currency left in the Euro, and there will be DM4 to the pound (and FF13). Gazole will be 20 cents a litre, but no-one will use it as cars run on air..
And why is this room all padded?
Still 1.200s next week folks.
The continuing story of Greece....
More like a soap really. How long can this drag on for? We were promised that a full resolution to the Greek debt problem would be in place by, let me see, which date shall we choose? Anyway, the latest promise is Monday. Dream on. Apparently there will be announcements on three issues. Firstly, the size of the haircut that private investors must take on their holdings (in addition to what hit the ECB will take). Secondly, the size of yet another bailout (MK111), which is going to have to be somewhere in the region of €130bn, and lastly another tranche of austerity measures announced by the Greek government for the Greek public to welcome with open arms.
A sideshow from Portugal...
Another fairly dismal round of bond refinancing during the week reminded the markets that Greece isn't where all the action is. In fact there is fun to be had wherever you look in southern Europe, if you like that sort of thing.
Can the UK and sterling capitalise on all of this?
Do bears defecate in Milton Keynes? Is the pope a Mormon? No, of course not. The latest apology for sterling is of course that we need the EU debt problem resolved quickly and positively in order to reassure the markets that the UK economy will not suffer. Lord preserve us from procrastinating apologists disguised as economists. Are we to believe that sterling is now inextricably tied in to a range between 1.0500 and 1.2050 against the lumbering school bully that is the Euro?
What now?
Maybe I should go and lie down for a while. Maybe then I'll wake up and the world will have come to its senses. Newt Gingrich will be US President, Greece will be the only currency left in the Euro, and there will be DM4 to the pound (and FF13). Gazole will be 20 cents a litre, but no-one will use it as cars run on air..
And why is this room all padded?
Still 1.200s next week folks.
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