Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

British Pound Undermined by the Bank of England, Sterling Bear Market Resumes

Currencies / British Pound Sep 25, 2009 - 12:39 AM GMT

By: Nadeem_Walayat

Currencies

Best Financial Markets Analysis ArticleThe Bank of England and Mervyn King's recent announcements in the mainstream press have clearly been aimed at sending the markets a signal that official policy favours a weak currency so as to support the economic recovery by boosting the export sector. The reaction in the markets was for a swift drop in the exchange rate across all major currencies and most notably against the Euro which triggered a fall of over 8% from the recent high of 1.20 to below 1.10


Following the fall in the Sterling to £/$ 1.62, Mervyn King stated :

“The fall in the exchange rate that we have seen will be helpful to that process but there’s no doubt that what we need to see now is a shift of resources into net exports – whether directly or in producing things that compete with imports.”

The resumption of the sterling bear market against all major currencies that are themselves engaged in a programme of competitive devaluation is inline with my analysis of the past 2 years following the peak of sterling in December 2007, that ever escalating measures to bailout the banks and stimulate an economy entering first recession and later depression would result in ever larger increase in the debt that tax payers would be lumbered with, far beyond that which the chancellor was estimating way back in November 2008, which prompted in depth analysis - Bankrupt Britain Trending Towards Hyper-Inflation?

The below debt and liabilities graphs illustrate the reasons why the sterling bear market has a long way to run which targets an eventual break below the 2008 low of £/$ 1.36.

Despite recent political rhetoric the politicians have yet to come clean on the degree of spending cuts and tax hikes necessary to narrow the budget deficit that projects to an average £150 billion per year for the next 4 years. This is not sustainable as I have repeatedly pointed out in in-depth analysis over the past 2 years as below selection illustrates -

The consequences of NOT effecting deep cuts in public spending AND raising taxes that narrows the budget deficit to under £40 billion per annum is that the unsustainable deficit could trigger a currency collapse and ignite hyper inflation. However cutting the budget deficit and sparking a double dip depression would also hit sterling therefore a lose, lose situation.

The British Pound is clearly discounting forward relative economic weakness which implies more quantitative easing and cuts on the interest rates paid to the banks on reserves parked at the Bank of England, so as to force the banks to take risks by increasing lending which they are not doing - Bailed Out Banks Not Lending, Sitting on Tax Payers Cash

British Pound Technical Picture

Sterling hit the contra trend rally target of £/$ 1.70 in early August after which it has been in a downtrend that has brought it to support at 1.60. At the moment the currency remains in a shallow down trending channel that continues to project towards a target of £/$1.55 by the end of October. The clear risk to sterling is for a break below the down sloping channel that would see a steeper drop to £/$ 1.50, which is my favoured expectation for sterling to reach by the end of October, which is also inline with my strong dollar expectations U.S. Dollar Bull Market Trend Forecast 2009 Update. However £/$ 1.50 would in my opinion be just a stepping stone enroute towards an eventual break of £/$ 1.36.

Ensure that you are subscribed to my always free newsletter to receive in depth analysis on UK house prices and also in the works a forecast for the UK economy covering the next 10 years.

By Nadeem Walayat http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 400 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

AM
17 Nov 09, 08:35
Sterling

Nadeem,

Your call for sterling to be 155, or favoured 150 by end of october clearly did not happen. We are back around the 168 region mid November.

What are your thought on sterling at the moment? Would appreciate an update on your thoughts.

Regards


Nadeem_Walayat
17 Nov 09, 09:26
Sterling

Sterlings just moved sideways, it's still pending a probable break to the downside. A lot hinges on the dollar scenerio which has not done anything for the past 3 months i.e. stuck in the tight 77 to 75 range.

I will need to analyse, inflation, GDp and debt to enable me to project sterling out, which I will do in the coming weeks.

Best.

NW


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules