Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What’s Wrong with the British Pound?

Currencies / British Pound Jun 25, 2009 - 04:28 PM GMT

By: Seven_Days_Ahead

Currencies

Best Financial Markets Analysis ArticleThe Macro Trader’s view:

After a solid rally away from the lows stretching over 3 months, much of June has been characterized by sideways trading. Cable seems to have has lost its way.


What has brought about the current spell of directionless trading? Will it resolve itself into a continuation of Sterling’s rally against the Dollar or will there be a retest of the lows?

The rally which begun back in March was, in our judgement, driven by the realisation that earlier forecasts which predicted the UK economy would be the worst affected of the G7 economies in the current down turn, had been proved wrong.

Moreover, data began to show the UK hitting a bottom in the recession ahead of the other leading economies and moved on to predict recovery in the 3rd or 4th quarter of this year - notable reports were the PMI Services survey and NIESR GDP estimate, and housing data was also supportive.

What then, has changed? Has the data begun to point to a double dip or has the US economy suddenly begun to accelerate out of recession, with a familiar V shaped recovery? The answer to all of these questions is no.  The UK is still releasing data consistent with recovery expectations and the US economy continues to show gradual (if unspectacular) improvement with growth expected to resume late 4th quarter 2009 or 1st quarter 2010. The only material change among the major economies is the Euro zone, which looks to be further away from recovery than recently thought.

So why is Cable looking confused? The Bank of England Governor has sought to play down recent bullish data, saying the recovery still looks uncertain and a long hard slog back to growth is expected.  This is the same group of policy- makers that failed to recognise the severity of the looming recession until it was upon them, and the same group that have consistently forecast a collapse in inflation that has yet to materialise. Conclusion? Take their utterances with a pinch of salt. The Bank is being cautious because it does not want to risk building pressure for a tighter policy, forcing it to act prematurely and risk killing the recovery.

The Bank is clearly taking the line that it would be better to even allow a “little” inflation to take hold (which they see a correction) as an easier and more familiar fight.

What then of the US? The Fed did moderate its language in yesterday’s FOMC policy statement thereby easing concern over deflation. But it reiterated that rates would remain at the current low levels for an extended period.  Not much new there.  But they also repeated their view that the economy was set to recover over the time-frame previously stated.

In short, the current environment sees both the Fed and the Bank of England taking a cautious approach to recovery signs in their respective economies, leading to a state of inertia among traders who had already begun to doubt whether the evidence they had seen of growth was real or no more than a pause in the recessionary environment.

We judge the UK is set to recover this year and the longer the Bank delays in changing policy, (although to act now would be premature) the stronger that recovery will be, which we expect to act as strong support for Sterling over the coming months.

 

The Technical Trader’s view:

The market reversed at the old Pivot from 2001 by completing a Double Bottom. But the minimum move of that Bottom has been achieved.

 

WEEKLY CHART

The market is still stagnating around that 38.2% Fibonacci retracement.

 

We’re frustrated.

We think there are good fundamental reasons for it to go further.

 

But it just ain’t doing it yet.

 

Look closer.

 

DAILY CHART

The tedious sideways price action is at least testament to the resilience of the market.

 

For there seems little appetite to sell off.

 

But a break up through the 1.6661/1.6802 band would certainly be reassuring and lead to further buying.

 

 

 

By Mark Sturdy
John Lewis

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2009 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in