we'll see how this plays out but interesting reading.
LFB Analysts Member Since Jul 2007
Posts: 60
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From what we have seen in the recent UK data the last Rate increase is still not fully factored in, this week from the UK we've seen; Manufacturing PMI higher, BRC Retail Sales % increased, Construction PMI higher (all of these way over last month as well), Consumer Confidence still in the 90's (an historically high number), Services PMI higher (over last month).
The Inflation reading at 1.9% is very close to the Bank's 2% target rate, and a there is a concern that it will jump to 2% next week. The house price index is at high levels, $400k average price, and the Consumer has shown resilience in dealing with high taxes and Gas at $7 a gallon. The Bank will have difficulty in justifying economically a Rate cut, especially after the recent Rate vote details. There has rarely been a time where the Bank has raised Rates, and then dropped them within a 3 month period:
http://www.thelfb.com/archives/1305
The UK is an economy that is in a very strong Business Cycle, that has rid itself of the growth question marks from June, and compared to the Business growth forecasts coming out of the US, and the Moody's report today that homeowners missing payments are set to double going into 2008, the Currency Pair GBP/USD looks a little undervalued from a Fundamental point of view.
One economy is moving ahead at target rates, one is stumbling around looking to the Central Bank to help sentiment, still showing growth but dragging a horrible sentiment around with it. Institutions will eventually buy the stronger economy, one of them will need to distance itself from the other.
One of the main reasons that the US$ has shown strength recently has little to do with US economic growth forecasts being attractive to $ buyers, and much more to do with a Global switch to US Treasury Debt in times of worry, and those commodities can only be bought in US$'s.
Take out the recent switch to Risk Aversion, and the US$ being judged just on its economic strength, and the Cable Pair would still probably be testing $2.0600.
A Rate decrease from the Bank this month? As City of London Traders our Analyst Team say; extremely unlikely with odds of 99.9% against, if that is “a very small chance” as your post suggests then they agree. They however are looking for Fundamental strength pushing the Technical Charts through $2.0200, a Daily close above the 50 SMA and, if the recent $ sentiment evaporates, another test of $2.0400 and then $2.0600. Here is our link on it today:
http://www.forexfactory.com/news.php?do=news&id=45539
Thank you, we are passionate about cutting to the things that Traders need to know, and putting it on the line when an opinion needs to be given. We are a Team of International Commodity Traders (retired) who worked Globally in Institutional Trading Rooms, therefore we are currently Short 'nonsense', and Long 'common sense'. Hope to see you visit.
LFB Analysts Member Since Jul 2007
Posts: 60
--------------------------------------------------------------------------------
From what we have seen in the recent UK data the last Rate increase is still not fully factored in, this week from the UK we've seen; Manufacturing PMI higher, BRC Retail Sales % increased, Construction PMI higher (all of these way over last month as well), Consumer Confidence still in the 90's (an historically high number), Services PMI higher (over last month).
The Inflation reading at 1.9% is very close to the Bank's 2% target rate, and a there is a concern that it will jump to 2% next week. The house price index is at high levels, $400k average price, and the Consumer has shown resilience in dealing with high taxes and Gas at $7 a gallon. The Bank will have difficulty in justifying economically a Rate cut, especially after the recent Rate vote details. There has rarely been a time where the Bank has raised Rates, and then dropped them within a 3 month period:
http://www.thelfb.com/archives/1305
The UK is an economy that is in a very strong Business Cycle, that has rid itself of the growth question marks from June, and compared to the Business growth forecasts coming out of the US, and the Moody's report today that homeowners missing payments are set to double going into 2008, the Currency Pair GBP/USD looks a little undervalued from a Fundamental point of view.
One economy is moving ahead at target rates, one is stumbling around looking to the Central Bank to help sentiment, still showing growth but dragging a horrible sentiment around with it. Institutions will eventually buy the stronger economy, one of them will need to distance itself from the other.
One of the main reasons that the US$ has shown strength recently has little to do with US economic growth forecasts being attractive to $ buyers, and much more to do with a Global switch to US Treasury Debt in times of worry, and those commodities can only be bought in US$'s.
Take out the recent switch to Risk Aversion, and the US$ being judged just on its economic strength, and the Cable Pair would still probably be testing $2.0600.
A Rate decrease from the Bank this month? As City of London Traders our Analyst Team say; extremely unlikely with odds of 99.9% against, if that is “a very small chance” as your post suggests then they agree. They however are looking for Fundamental strength pushing the Technical Charts through $2.0200, a Daily close above the 50 SMA and, if the recent $ sentiment evaporates, another test of $2.0400 and then $2.0600. Here is our link on it today:
http://www.forexfactory.com/news.php?do=news&id=45539
Thank you, we are passionate about cutting to the things that Traders need to know, and putting it on the line when an opinion needs to be given. We are a Team of International Commodity Traders (retired) who worked Globally in Institutional Trading Rooms, therefore we are currently Short 'nonsense', and Long 'common sense'. Hope to see you visit.
Trade what you see, not what you think.