The Pounds Recovery?

by **arjay** » August 21, 2010, 9:06 am

When I made the original remark, it was that the pound surely couldn't go any lower. I then got asked "why" and ended up giving my reasoning as to why I thought the pound would recover. I don't believe I ever actually stated that it would recover specifically against the baht, just generally.

You may recognise the above as a sign of someone "wriggling", and yes currently I am feeling a little uncomfortable. :oops:

The above said, I still do see (the same) many reasons why the pound should recover and I still believe it will. In fact it is still up against many currencies since May. OK it's having a hard time at the moment (and particularly against the baht - due to the strength of the baht), because of factors like market sentiment, and markets can be fickle and not always logical.

When the next good UK economic news comes out it should perk up. Similarly, when there is talk of increased UK interest rates it should pick up. Or indeed when the markets take greater note of the huge US debt and the dollar weakens. Currently, the dollar is still being seen as a safer haven than other currencies.

For those interested in the latest UK Economic news:
http://www.thisismoney.co.uk/news/artic ... _page_id=2

by **lepidoptra** » August 21, 2010, 11:35 pm

arjay wrote:When the next good UK economic news comes out it should perk up.

Arjay
You must be the ultimate optimist. Each time you give a different reason why the pound falters against the baht or the baht gains in strength. Exactly the same as you did when the baht

was over 60 to the GBP
I believe now you should resort to the crystal ball
No offence mean't I'm just a pessimist

by **arjay** » August 25, 2010, 7:33 pm

This gives an indication of how sensitive/susceptible/whimsical the markets can be with regard to sterling:

http://www.thisismoney.co.uk/news/artic ... _page_id=2

Sterling wobbles on double-dip warning
By Adrian Lowery
24 August 2010, 12:57pm

The pound lost a cent against the dollar today after a Bank of England rate-setter said the UK economy is at risk of sliding back into recession.

Martin Weale - the newest member of the monetary policy committee - admitted that the Bank's own economic growth forecasts for this year and next could be too optimistic.

'I think it would be foolish to say that there's no risk of [a return to recession]," Weale told the Times newspaper, noting that the BoE's latest economic forecasts put 'a significant chance on the economy contracting over a four-quarter period'.

Currency traders responded by selling off sterling, which fell below $1.54 from an overnight rate of $1.55.

Analysts said sterling is currently vulnerable to comments from officials that suggest rates will stay low for longer.

'Weale's comments were not too surprising, but it helped produce some weakness in sterling given overall dollar strength,' said Steve Barrow, head of G10 currency research at Standard Bank.

'At the moment, the doves have the upper hand.'

The MPC voted 8-1 to keep the bank rate on hold at 0.5% for the 17th month in August and is expected to keep interest rates at this record low well into 2011. The Bank has even said it remains ready to add more stimulus to the economy - in the form of quantitative easing - if necessary.

However, the monetary policy debate was fired up yesterday by comments from controversial economist Andrew Lilico, who suggested that inflation is set to spiral and that this will force the base rate up to 8% by 2012.

But Weale said he did not think there was a substantial risk of inflation spiralling out of control.

'I find it easier to see why growth should come in a bit below (the forecast) than I do to see why inflation should come in above the forecast,' Weale said.

Most of the MPC agree that one-off factors have driven up inflation this year and argue price pressures will wane over the next year or so.

'I am very comfortable with the view that there is slack in the economy, that unemployment is likely to rise further, and the way things are developing I find it hard to see that there are unusually substantial risks to inflation,' he said.

Read more: http://www.thisismoney.co.uk/news/artic ... z0xcUxqQxJ

by **Bandung_Dero** » August 31, 2010, 7:10 am

As promised 2 months ago here is an update to the GBP/Baht x-rate graph going back to 2003 that I attached then.

I don't things are going the way Arjay was hoping for then and just looks to be more of a correction than recovery.

by **arjay** » August 31, 2010, 7:37 am

Bandung, it would please me and assist my credibility

if you could re-post the part of the graph showing only the period from the end april/early May this year when I actually made my comments/forecast, up to the present time. It wouldn't look so small then.

I think its more a case of the recovery having a setback.

Note the UK markets re-open today after the bank holiday weekend.

by **lepidoptra** » August 31, 2010, 9:08 am

arjay wrote:I think its more a case of the recovery having a setback.

My Dear Arjay
Why don't you just admit that your comments and forecasts have been completely wrong.
We are in the middle of yet another setback. In fact the pound is dropping in value day by day and heading towards it's lowest point in many years.
C'mon dear fellow we've all had to admit we've been wrong at some time or the other. :shock:

by **Zidane** » August 31, 2010, 9:30 am

Not all doom and gloom because in their annual report published yesterday,the British Chamber of Commerce predicted that the UK average growth would go up by 1.7% for 2010 instead of the 1.3% forecast.
Also for 2011 they predict the growth rate will be 2.2% instead of the original 2% previously predicted.
However,as the Government cuts bite and unemployment continues to rise their is still the chance of "double dip" recession.

Other than Germany the UK compares favourably to the likes of France,Italy,Spain,Portugal,Greece and also the USA.
For me I'll be happy if the pound can stick around 50+ to the baht......I just wish my mother had given birth to me in Switzerland !

by **lepidoptra** » August 31, 2010, 9:58 am

lepidoptra wrote:I just wish my mother had given birth to me in Switzerland !

Singapore or Hong Kong would have suited me fine (If it was a well to do family of course)

by **arjay** » August 31, 2010, 11:22 am

Lepidoptra, please extend me the courtesy of judging me over the timescale I referred to when making my comments, - i.e over the next 9-12 months from last May. That means a further 6 months. (and not have a dig every week)

If next February the pound sterling is down on what it was last April/May, you can have your day and gloat.

And yes, I wish I had kept my Swiss bank account, that I had opened when over there on holiday in 1972-1975.

by **lepidoptra** » August 31, 2010, 11:28 am

lepidoptra wrote:you can have your day and gloat.

My dear Arjay I do not gloat
I wish for the same result as yourself.
Every opinion must be treated with respect and I hope I haven't offended you
Kind regards

by **arjay** » August 31, 2010, 11:40 am

Lepi, no not quite. I am feeling a bit warm though. :oops:

by **Eazy-Going** » August 31, 2010, 11:57 am

I'm with arjay on this one for what my thoughts are worth...but then again I am the eternal optomist [-o<

by **JimboPSM** » August 31, 2010, 12:45 pm

There has been a perversity in the currency markets over the last month where the GBP and EUR have (comparatively speaking) been getting a lot of good economic data yet both have either been falling or at best maintaining station against currencies which have been getting substantially worse economic data.

This perversity has begun to attract attention on Bloomberg and CNBC Business News, but so far they have only been talking about it rather than analysing it.

In my opinion I believe that it is partly linked to the City (despite what they may say) not liking the proposed austerity regimes in the UK and Europe and have been spreading "doubts" about whether austerity can work and that it severely limits prospects for recovery; they have effectively been trying to sabotage "austerity" before it has really even got off the ground.

The City actually would like a return to deficit financing, bailouts and bubbles which they have been thriving on and want to continue to be able to do so.

There is also a fear (for similar reasons) in US financial circles that successful UK and European austerity programs might lead to similar policy changes being implemented in the US.

by **JimboPSM** » October 12, 2010, 2:14 pm

The recovery of the GBP stalled a couple of months ago when the GBP tested and failed to break through 1.60 against the USD; for the GBP to improve against the THB it really has to break through 1.60 against the USD.

Unfortunately no help can be expected from the US in helping to improve the USD/THB rate (and consequent uplift in GBP/THB & EUR/THB rate). Partisanship has become increasingly extreme and the rhetoric so vitriolic that both major parties are doing their utmost to sabotage anything that the other proposes to improve the economy.

In US politics today, political points scoring trumps the prosperity of its citizens - while US expats are amongst the biggest victims of the dire state of US politics, the fallout extends to expats from other countries.

Over the last few trading days it has been testing the 1.60 level again as shown in the chart below:

This matrix shows how the GBP/THB rate is impacted by the GBP/USD rate:

by **BobHelm** » October 12, 2010, 3:23 pm

I think you are correct Jimbo - that the GBP can expect little assistance from the USD in a movement against the Baht; and that the 1:60 is a bit of a 'barrier' that it has to climb through before it makes much impact on its' own.
Sadly the economic indicators currently coming out of the UK are not exactly the sort that sets my heart racing with the prospect of economic recovery..
http://www.bbc.co.uk/news/business-11518081

Weak consumer confidence 'slows growth in retail sales'

http://www.bbc.co.uk/news/business-11515818

House prices heading for a fall, surveyors warn

I was also hearing some TV 'talk' about the possibility of the UK needing another 'stimulus package'. If true would be in defiance of the current European view that the way forward is debt reduction & frugality rather than 'splash the cash'...

Quite a number of Japanese & American monthly indicator due to be published this week so maybe something will be clearer after that...although the markets seem to have their own view of what is happening in the world which facts (supporting or denying) seem to have little real effect on....

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