What's Up with GBP?

With the UK headed into a deep recession, a country that derives much of it's GDP from financial services, and banks as bad off as U.S. banks if not worse with the real possibility of some being nationalized, how the heck has their currency been rising against the Swiss Franc and Euro in recent days????!

financial services are used by rich people. rich people arent as effected by the recession as others. so the financial services stay pretty much intact, and the GBP survives. there is obviously a lot more to it than that, but consider this a watered down fifth grade explanation.

Are you sure about that?

http://in.news.yahoo.com/241/2009012...-concerns.html

The uptick I'm referring to I guess is really just a recent bounce. I guess I just sold GPB with a stroke of bad timing. I would have been sittin pretty had I sold a week earlier but hindsight is always 20-20.

Recent days as in...the last two days? I haven't been following GBPCHF but EURGBP has been heading up for the last two weeks with a correction in the last two days. Plus, the long term trend is still heading up. It doesn't matter how bad a country's economy is, the fall of its currency still has to retrace once in a while.

and blacksun, not to attack you or anything but the UK financial industry is FAR from intact. The banking system over there is getting hit just as hard as the US one and it looks like the final outcome will probably be worse seeing how the UK govt. has already effectively nationalize RBS and the rest of the banks might be hit with the same fate.

Ya, that's what I just realized in looking at a longer term chart. Duh.

The reason for this retracement is probably both technical and fundamental. After a long drop a retracement is due, also note there is MACD divergence on the daily chart.

On a fundamental basis Barclays have said that they in no way need government help. This is a sign that perhaps not all UK banks are in the same mess that RBS is in. Also retail figures have come out much better than expected with an actaul possitive read for the month of December. Lastly if equity markets are rising, which they have been for the last few days, the USD will get sold. This is because the USD is seen (atleast for now) as the safe haven. When the equity markets rise it is a sign that there is more risk appetite and so US treasurys get sold and international equities get bought creating the USD to fall. When the market becomes more risk averse global equities are sold and US treasuries are bought creating the USD to appreaciate.

It is these reasons that the GBP has gained ground on the USD. In short when the market is risk averse the GBP will get sold off against most things but when the market becomes more rsik seaking the GBP will get bought against most things.

Hope this gives you a better understanding of currency mechanics

Charlie

GBP lost its streght.. I even heard some rumors that GBP might be join into Euro.. Is that true ? (I mean the rumors)

they are rumours and thats it... Germany have a get out of jail clause with the Euro allegedly if it starts bringing them down... problem is all nations arent developed the same economically... and i dont think GB will let their monetary policy in the hands of zzz Germans...dont mention the war..

The United Kingdom will not be entering the EURO anytime soon. It needs to goto a referendum and there are too many middle aged people who would vote against.

no, i know dude. i was just throwing out an idea. trying to get some thinking going.