GBP (British Pound)

GBP (British Pound)

Postby winston » Sun May 18, 2008 5:58 pm

Financial Times: Economic data take toll on British pound

A toxic mix of data showing slowing UK economic activity and rising prices sent the pound downwards towards a three-month low against the dollar on Tuesday.

A survey from the British Retail Consortium showed UK sales registered a 1.5% annual decline in April, the first time spending has dropped in two consecutive months since 2005.

Meanwhile, a survey from the Royal Institute of Chartered Surveyors revealed that a record number of its members reported house price falls in the three months to April.

The annual rate of UK CPI increased from 2.5% in March to 3% in April, way ahead of the Bank of England's 2% target and a consensus forecast for a 2.6% rise.

The pound spiked higher as traders reasoned that surging inflation would reduce the likelihood that the Bank of England's monetary committee would cut rates by a further 25 basis points to 4.75% at its policy meeting next month.

However, the pound's rally ran out of steam as investors reflected on the increasing evidence that the UK was facing an economic slowdown. Price action in sterling indicates that the market has placed more emphasis on slowdown in growth versus higher inflation,’ said Kamal Sharma of JPMorgan.

Source: Financial Times
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Re: British Pound

Postby winston » Sat May 31, 2008 10:01 am

Pound to Fall to 81 Pence Per Euro Within Months, Dresdner Says
By Anchalee Worrachate

May 30 (Bloomberg) -- The pound will fall to a record against the euro in coming months as a weakening economy prompts investors to resume bets the Bank of England will add to interest rate cuts this year, according to Dresdner Kleinwort.

The U.K. currency will decline to 81 pence per euro in three months, Michael Klawitter, a currency strategist at Dresdner, wrote yesterday. It traded at 80.98 pence April 16, the lowest level since the euro's inception in 1999. The currency was at 78.43 pence by 7:43 a.m. in London today.

The pound is headed for its second straight monthly gain versus the euro on speculation policy makers will refrain from cutting interest rates as inflation accelerates. A Citigroup Inc. survey yesterday showed inflation may quicken to twice the central bank's target. Bank of England Governor Mervyn King predicted this month that property values will keep falling and the economy may contract.

``We see these rather hawkish market expectations for the Bank of England as unjustified and call for a return of rate-cut speculation in the not-too-distant future,'' Frankfurt-based Klawitter wrote yesterday. ``There are few other means left than monetary policy to support the economy.''

The pound was poised to snap three weeks of losses after gaining as much as 1.4 percent since May 23. It has dropped 6.3 percent versus the European single currency this year.

Dresdner's forecast is more bearish than most of its peers. The median of 35 analyst and strategist forecasts compiled by Bloomberg is for the pound to trade at 79 pence per euro by the end of the third quarter. The highest forecast is 84 pence and the lowest 72 pence.

Lower Rates

The U.K. central bank kept interest rates at 5 percent on May 8 after record oil prices prompted the biggest jump in inflation since 2002 in April. Policy makers, who next meet on June 5, signaled they have little scope to lower rates further as inflation quickens, minutes of the meeting showed. The bank has lowered rates twice this year.

Dresdner maintained its forecast that the central bank will cut its benchmark rate to 4.25 percent by year-end as growth falters amid the property slump. Nationwide Building Society, Britain's fourth-biggest mortgage lender, said yesterday U.K. house prices fell in May by the most since at least 1991 as the shortage of credit starved the market of buyers.

``In this situation, it is difficult to see how the pound will not move lower,'' Klawitter wrote. ``The housing market is in a free fall. Household balance sheets are stretched and the government's cushion to spending is small.''

U.K. consumer confidence fell in May to the lowest level since Margaret Thatcher was ousted as prime minister, GfK NOP Ltd. said today. A gauge of sentiment declined 5 points from April to minus 29, the lowest since November 1990, the month Thatcher left office, the London-based market researcher said, citing its survey of 2,003 people for the European Commission.
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Re: British Pound

Postby kennynah » Sat May 31, 2008 10:21 am

picture paints a thousand words...

see the breakdown of eur/gbp from the MA50.... just to note that FX has a habit of following closely TAs... so, what can be deduced from this chart, is that UK BoE is highly expected to hike rates in the near future...

Image

i appreciate your further inputs
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Re: British Pound

Postby winston » Thu Jun 05, 2008 10:58 pm

U.K. Pound Falls Versus Euro as BOE Holds Key Rate at 5 Percent
By Anchalee Worrachate and Kim-Mai Cutler

June 5 (Bloomberg) -- The pound fell against the euro after accelerating inflation prevented the Bank of England from cutting interest rates to support the economy.

The Monetary Policy Committee, led by Governor Mervyn King, held its main rate at 5 percent today as forecast in a Bloomberg News survey, even after the country's biggest mortgage lender said house prices dropped the most in 15 years in May. It extended losses versus the euro as European Central Bank President Jean-Claude Trichet suggested borrowing costs may be lifted next month to quell price growth.

``Sterling has gone to hell in a handbag,'' David Bloom, London-based global head of currency strategy at HSBC Plc, Europe's biggest bank by market value, said in a Bloomberg Television interview. ``Sell it against anything that you have. Sell it across the board. Sterling is going down.''

The pound dropped to 79.54 pence per euro, the lowest level since May 28, and was at 79.47 pence by 3:25 p.m. in London, from 78.94 yesterday. It was also at $1.9552, from $1.9556 yesterday, after slipping to as low as $1.9462.

The U.K. central bank's rate-setting committee didn't publish a statement after today's decision, which was predicted by all 60 economists surveyed by Bloomberg. Policy makers voted 8 to 1 to keep rates on hold at last month's meeting as record-high oil prices and spiraling food costs stoked inflation. Consumer- price growth held above the bank's 2 percent target for the seven months through April, government data show.

U.K. policy makers last cut borrowing costs in April to try and prevent a slowdown in the real-estate market and a credit squeeze from harming the wider economy.

``Gilts are following U.S. Treasuries and German bunds lower,'' said Peter Schaffrik, a fixed-income strategist at Dresdner Kleinwort in London. ``We believe the U.K. economy will slow down enough to bring down price pressures and interest rates. But at the moment inflation remains a key issue.''

`Forced to Cut'

U.K. government debt may reverse its declines on speculation a waning economy will force the central bank to lower borrowing costs later in the year. Economists in a Bloomberg survey predict the central bank will cut its benchmark rate to 4.50 percent by the end of this year.

``We still have a preference for shorter-dated gilts,'' said David Scammell, a money manager in London at Schroders Investment Management Ltd. which has about $19.5 billion in assets. ``We think the Bank of England will be forced to cut rates'' in 2008, he said.

HBOS Plc said today the cost of an average home slipped 3.8 percent from a year earlier, the most since April 1993. Shares in Bradford & Bingley Plc, the U.K.'s biggest home-loan provider to landlords, fell the most since the bank went public in 2000 on June 2 after it reported rising loan arrears.

Inflation `Worries'

``Everything is coming together at the wrong time for the pound,'' said Geoffrey Yu, a Zurich-based currency strategist at UBS AG, Switzerland's largest lender, who forecasts the currency will drop to $1.88 and 80 pence per euro by the end of June. ``The mortgage market is highly exposed and there are worries about inflation. The U.K. bank may have to stay on hold until the end of the year.''

The pound has fallen against 14 of the 16 most-traded currencies since Dec. 6, when the Bank of England started lowering its main rate, from a 6 1/2-year high of 5.75 percent. It has dropped 10 percent versus the euro and 4 percent against the dollar in that time.

The ECB has held its main rate at a more than six-year high of 4 percent since June, while the Federal Reserve has lowered its target rate for overnight loans between banks seven times since September, to 2 percent.

Expectations for inflation in Europe's second-biggest economy today rose to the highest in 8 1/2 years, according to the spread between the 10-year gilt and its index-linked counterpart. The so-called breakeven rate, a gauge of bond traders' views on whether price-growth will quicken or slow, climbed to 3.75 percent, from 3.48 percent before the Bank of England's last interest-rate announcement on May 8.
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Bank of England

Postby millionairemind » Thu Aug 14, 2008 10:03 am

Sterling slumps to 12-year low
By Edmund Conway and Angela Monaghan
Last Updated: 11:18pm BST 13/08/2008

The pound has fallen to its weakest level in 12 years after the Bank of England signalled that it is no longer prepared to raise interest rates.


Sterling dipped sharply against both the dollar and the euro after the Bank used its quarterly Inflation Report to slash its economic growth forecasts and predicted that inflation will dip back towards its 2pc target over the next two years.

The pound dropped by 1.8pc on its trade-weighted index, which measures it against a basket of other currencies, to 90.8 points - the lowest level since December 1996. In one of its biggest ever falls against the dollar, it dropped 3.6 cents to $1.8651. It also weakened significantly against the euro, dropping more than 1p to 79.71p.

It followed Bank Governor Mervyn King's warning that the next year will be "painful" as the economy stagnates or shrinks and inflation rises to around 5pc.

Full story
http://www.telegraph.co.uk/money/main.j ... con114.xml
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Re: British Pound

Postby millionairemind » Sat Aug 16, 2008 11:12 am

Pound and gold down as dollar rises
By Edmund Conway and Angela Monaghan
Last Updated: 11:19pm BST 15/08/2008

The pound could soon dive to barely more than a dollar and a half while gold prices plunge to $650, experts predicted yesterday amid fresh evidence that the commodity boom is ending and the dollar's resurgence is under way.


Michael Saunders, head of European economics at Citigroup, said it "would not be a surprise" if sterling fell to levels last seen in 2002 - around $1.55 - despite sitting above two dollars as recently as mid-July.

His comments came as sterling dropped to a fresh two-year low against the dollar, down over a cent at $1.8632.

Its recent series of daily falls - down 3pc over the week - is the worst since the early 1970s, although it fell more sharply in the wake of Black Wednesday in 1992. It also rose slightly against the euro yesterday.

The pound's weakness followed the Bank of England's Inflation Report this week, in which it signalled that it is unlikely to raise interest rates in the near future. Its fall has coincided with the dollar's renaissance, as investors sell out of commodities and butt into the US currency, as fears grow for the fate of the eurozone economies.

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As the dollar fell, gold dropped beneath the talismanic $800 mark for the first time since late last year, dropping to $772.98 an ounce. It has lost a quarter of its value since hitting its record high of $1,032.70 in March.

Full story
http://www.telegraph.co.uk/money/main.j ... lar116.xml
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Re: British Pound

Postby -dol- » Sat Aug 16, 2008 11:56 am

Still have some sterling pounds from my last jaunt in the UK. Given the small amount, will just hang on it as it decline further. It's a sell for those with too much for comfort.

UK seems like going to be in worst shape than the US. UK real estate (probably with the rare exception of some choice London locations) is not looking good.
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Re: British Pound

Postby kennynah » Sun Aug 17, 2008 2:49 am

looks set to be pounded
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Re: British Pound

Postby winston » Sun Aug 31, 2008 8:21 am

THINGS HAVE BEEN BETTER IN ENGLAND

The market's take on England's economy: Things have been better.

In this case, the market has hammered England's currency, the pound, to a two-year low against the U.S. dollar.

A currency tends to rise when its home economy is running strong and interest rates remain high. A currency tends to fall when its home economy is struggling.

The market leads the news. So expect more headlines on weak U.K. retail sales, lower U.K. home prices, and lower U.K. interest rates ahead.
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Re: British Pound

Postby millionairemind » Mon Sep 01, 2008 4:53 pm

Economic headwinds hit pound
By Shyamantha Asokan and Peter Garnham

Published: August 29 2008 11:21 | Last updated: August 29 2008 18:42

The pound continued its recent slide this week as evidence mounted that the UK economy was headed for recession.

Earlier this month, a string of sobering economic data – including news the UK economy ground to a halt in the second quarter – weighed on the pound.

Sterling’s woes were compounded this week as figures showed UK house prices fell at their fastest pace since 1991 in August, while UK retail sales plunged to their lowest level in 25 years.

This raised expectations that the Bank of England, which is due to meet next week, would move to cut UK interest rates, further undermining the pound’s appeal to investors. “Sterling remains under broad based pressure following further bad news from housing and retail,” said Gabriel de Kock at JPMorgan. “The recent UK data have been universally bearish for the pound and the path of least resistance remains further weakness.”

The pound on Friday dropped to $1.8188 against the dollar, its weakest level in two years and taking its losses over the week to 1.7 per cent.

In August, the pound lost more than 8 per cent against the dollar, its weakest monthly performance since sterling’s ejection from the European Exchange Rate Mechanism in September 1992. Trade-weighted sterling, which measures the pound’s value against the currencies of the UK’s leading trading partners, dropped to a 12-year low.

Meanwhile, the pound dropped 1 per cent to £0.8075 against the euro on the week, within touching distance of the record low of £0.8097 it hit in April after the Bank of England cut interest rates.

Elsewhere, the dollar maintained its recent strong run, hitting a fresh six-month high of $1.4570 against the euro as the Ifo index of German business sentiment reported its worst results in three years.

The dollar has rallied during the past month as investors realised the credit crunch was having a more serious effect on countries outside the US than was previously thought. The dollar gave back some of its gains later in the week but still stood 0.7 per cent higher at $1.4670 on the week. Over the month, the dollar has risen 5.4 per cent against the euro, its strongest monthly rise since the creation of the single currency in 1999.

“The trend has turned,” said John Higgins at Capital Economics. “After a couple of weeks the dollar rebound appeared to be more than a blip, and investors are reconsidering fundamental currency valuations.”

Over the week, the dollar also rose 0.2 per cent to SFr1.1009 against the Swiss franc, climbed 1.2 per cent to $0.8562 against the Australian dollar and gained 1.6 per cent to C$1.0635 against the Canadian dollar.

The dollar lost ground against the yen, however, easing 1.2 per cent to Y108.63 as data showed Japanese consumer spending and industrial production rose by more than expected in July.

The data raised hopes for a rebound from the economic contraction of the second quarter. Tokyo also on Friday announced a $107bn fiscal stimulus package, which includes tax cuts and larger government-guaranteed loans.

The yen rose 2.8 per cent over the week to Y197.73 against the pound and gained 2 per cent to Y159.48 against the euro.

“The data, along with the evidence that at least the government is being pro-active in supporting the economy, are likely to keep the yen on a firm footing,” said Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ

Copyright The Financial Times Limited 2008
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