- Spike in Sterling after Thai bank moves
- Strong German IFO supports Euro
We are told that 25 percent of road deaths are work related and we are
told that more regulation is needed as a result. What we are not told
is how many miles are driven for work reasons rather than leisure ones.
I would guess it is roughly a quarter of all mileage but what do I know
- oh and I haven’t got an axe to grind. Yesterday’s market was a muted
affair with a general mood of US Dollar strength which followed a
similar day on Friday and the lack of convincing data allowed all of
that to take place unabashed. However, this morning is a very different
picture. Sterling is on a rally as I write, gaining nearly two cents on
the US Dollar and up against all comers. The reason for this boost can
only be to do with a flight to quality following the Central Bank of
Thailand’s surprise announcement to impose currency controls. This has
slapped the Thai stock market down by 16 percent and the funds are
flooding out looking for a safe home. Sterling, it seems, is the
harbour of choice and we are on a rise as a result. The rest of the day
is light on data after we had the German IFO business confidence report
first thing this morning which was well above expectations at 108.70.
On the back of that, the Euro should recover the losses it has suffered
against the Pound overnight but more of that below. And finally, as
someone brought up on the Jetsons, Tom and Jerry and the Flintstones,
and someone who always preferred Betty by the way, the death of Joseph
Barbera is a very sad event but at 95 he had a pretty good innings.
The New Zealand Dollar has weakened against the Pound along with every
other currency this morning. This spike is bucking the existing
downward trend but that downward momentum is likely to remain in place
as long as GBPNZD remains below NZ$2.8550. The fundamentals certainly
favour the NZ Dollar with Kiwi interest rates at 7.25 percent against
the UK’s 5.0 percent and whilst the prospects for higher interest rates
in the UK are a matter of rumour and speculation, they are almost a
dead cert in New Zealand. As I have been saying for a number of days,
we are entering the most volatile period of the year and there are
bound to be spikes and troughs in all currency pairs over the coming
fortnight. This spike in GBPNZD comes on the back of an external factor
which is totally outside the view of most of you interested parties
who’re watching the Pound and the Kiwi Dollar but perhaps wouldn’t
consider the effect that the Thai central bank might have on these two
currencies. It is understandable and perfectly reasonable to ignore the
Thai central bank when considering your move to New Zealand but, as
events overnight have admirably demonstrated, as with the Raptors in
Jurassic park, it isn’t the data that you are watching which gets you.
The answer to this 360 degree conundrum is to place a firm automated
currency order to take advantage of the moves wherever, whenever and
for whatever reason they occur. Please contact your FX Consultant to
discuss the most appropriate target exchange rates before the end of
this week.
Sterling’s push higher against the Euro overnight is unravelling as I
write. As mentioned above, the spike wads a factor of funds flows
instigated by the Thai central bank’s imposition of exchange controls
overnight. This dragged heaps of funds into the Pound where interest
rates are attractive and the prospects for higher rates is still
likely. The unravelling comes after the very encouraging German
business sentiment index from the IFO institute and ahead of a mountain
of UK data due that will be released tomorrow. In order to see the wood
through the trees, it is probably easiest to look at the charts and the
top of the GBPEUR exchange rate comes at €1.4920, precisely where the
upward move overnight topped out. This market top relates to a downward
trendline which extends all the way back to December 2002 and has
remained unbroken for that whole four year period. Understandably,
traders are very wary of testing above the line for fear of getting
their fingers burned. We should see another dip in the GBPEUR exchange
rate and that could even get as low as €1.4750 without breaking the
current range. In fact we could get as low as €1.4370 and still remain
within the triangle pattern that has been in place for four years. That
is just how volatile this market can get in the thinly traded Christmas
holiday period. As before, we recommend you contact your FX
Consultant to take advantage of this Christmas led volatility.
To send
soldiers into a combat zone without the appropriate basic equipment is,
in my view, unforgivable and inexcusable and represents a breach of
trust that the soldiers have in those in Government.
Oxfordshire assistant deputy coroner Andrew Walker
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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