The Pound

[HAL9000]

Today, so far, the pound has fallen over 5 cents against the US dollar - 2.5 cents in the last ten minutes! It's down roughly the same against the Euro in percentage terms.

The beginning of a long term freefall or just a short term sell off?

Good or bad?

[????]

Long term devaluation...which we're already a fair bit through.

Bad for inflation and given that our exporters over rely on weakly growing established markets such as Europe and The US it has not yet given us anything to smile about in export markets.

[Marmora Man]

The fall is mostly in response to uncertainty about forthcoming election - encourage everyone to vote, in my opinion for Conservatives but at least for anything but a hung parliament.

[Brendan]

Isn?t it quite common for a country?s currency to drop in value before an election, especially a hotly contested one?

[Huguenot]

Agreed MM, the one thing we don't need is a hung parliament. That's what seems to be driving this.

Other metrics are rising - the emergence from recession was underestimated for example.

Labour have undoubtedly lost the mandate to govern, mostly through incompetence. The tragedy is that the Conservatives are not doing nearly enough to fill the gap. More than anything the elctorate seems to be unsure whether the Tories are being disingenuous about their motives and intentions.

[Rhinestone Cowboy]

Hello the fall is also due to Pru buying AIG Asia unit for $35.5 Bill of which $25 Bill is in cash so mkts always think they have to do ths now when they would have been buying USD over past months to get a decent hedge.

I work for hedge fund mainly in commodoties but we do trade currencies just to be clear.

[HAL9000]

I think this article probably summarises the main issues fairly accurately: Traders build up record bets against sterling.

One thing it doesn't mention is the possibility that a consortium led by George Soros has placed massive bets against the Euro on the basis that the Eurozone could fall apart if Greece, Italy, Spain and Portugal default.

[legalbeagle]

Rhinestone Cowboy Wrote:

-------------------------------------------------------

> Hello the fall is also due to Pru buying AIG Asia

> unit for $35.5 Bill of which $25 Bill is in cash

> so mkts always think they have to do ths now when

> they would have been buying USD over past months

> to get a decent hedge.

>

> I work for hedge fund mainly in commodoties but we

> do trade currencies just to be clear.

RC - I was a hedge fund lawyer for some years and that isn't "clear" to me!! Hmmmm. Maybe I've been out of the market too long.......

[????]

List of potential defaulters goes something like Greece, Spain, Portugal, Italy...er...UK. We are in the speculators sites again. Short term (ie this week) sterling is falling becuase of election etc long term there's already been a significant devalustion since 2006/7 and the state of our finances and unclear committments to how we deal with our debt makes this unlikely ti improve. If the Euro itself wasn't in a bit of a turmoil Sterling would have fallen even further.

[Annasfield]

Typical - I'm going to France next week. Reckon it's worth getting my Euros ASAP?

[Rhinestone Cowboy]

The Pru buying a US Dollar company for $35 billion of which $25 Billion in cash

so they need USD they are a UK based company and so have cash in GBP pounds They Sell GBP and Buy USD

When this was annouced around 10am the mkt was trading 1.5100 after which it fell to 1.4800 as everyone assumes the Pru is going to sell GBP and Buy USD . So everyone starts selling to A) get out of a long position B) Take profit C) Establish new short positions to make some on back of the news.

At the close we are back to 1.4989 so everyone who thought PRU was selling has realised they had already got the USD and we are back to where we started

We think GBP is toast and going to 1.4000 by June but thats just our opinion and we trade other peoples money not ours

Hope that clears it up

[legalbeagle]

It does! Interesing, thanks.

[vinceayre]

Rhinestone,

What do you think will happen to the pound versus Euro.

Will it be saved by the Euro being viewed as a worse bet than the pound or is it all equally as bad as each other and we are all doomed. Which i guess means if the dollar gets stronger against both currencies gold will decrease in price.

It would be interesting to know what a professional thinks as from a purely amateurs point of view I would have thought the pound will be saved by the euro zone being so much worse off than we are with the PIGS being in the state they are, at least after the election that is.

[SeanMacGabhann]

no offence to Rhinestone, but as a professional the honest answer is "no one can know for sure, it's all speculation and we haven't covered ourselves in glory with THAT in the last couple of years", surely?

[SteveT]

Huguenot wrote:- the one thing we don't need is a hung parliament.

Wanna bet,

string em up,

the expense fiddling thieves some might say,

but I wouldn't.:))

[????]

Sean what part of Rhinestones

[quote name=We think GBP is toast and going to 1.4000 by June but thats just our opinion]

doesn't just say that?

If you do any significant buying or selling in international markets especially with longer term plans or lead times (in say manufacturing) then hedging is an absolutely vital instrument that actually reduces risks. That speculatirs use it for making or losing huge sums is a bi-product and not the whole kaboodle...we know you don't like bankers (a bit ironic) but hedging is a vital instrument for taking risk out of internatinal trade not all just Mayfair spivs shorting Greece.....

[SteveT]

With the devaluation of our trusted currency perhaps you should be revalued ???? to Au.

[????]

The Yuan please Steve

[Mick Mac]

Annasfield Wrote:

-------------------------------------------------------

> Typical - I'm going to France next week. Reckon

> it's worth getting my Euros ASAP?

Nice one Anna. :)

[SeanMacGabhann]

easy quids - I wasn't having a pop at Rhinestone at all. Or at hedging for that matter

I was merely suggesting that anyone (in this case vince) asking a professional for an opinion, will only get that. An opinion. easy enough to find an opposite one

but either way, the truth is no-one knows. But I do think that subscribing to too many negative opinions will tend to make that negative outcome more likely. I'm not sticking my fingers in my ear and going "la la la" but there is some merit in thinking/acting positively in these grim times as well

[????]

I'm just sticking up for West Ham....sorry a bit grumpy this morning

[Rhinestone Cowboy]

trade up to 1.5150 where I will sell GBP

[Rhinestone Cowboy]

Ha sry too many screens and not enough coffee

[Rhinestone Cowboy]

Right

I do not really have an opinion on Eurozone but I do agree that they are in worse position than UK

Hsbc Sold ?5 bill on Monday and also traded options with strikes around 1.4200 1.4000 area re the Pru Hedge but you did not hear that from me.

I would not be selling GBP/USD until after the US unemployment numbers on friday we are trading 1.5050 and I think we get a bad US number trade up to 1.5150 and I will then start selling.

Where we go who knows but GBP/EUR Parity?

[????]

All those pensioners living in Spain on their UK pensions should be hedging by betting against the ? - say on IG Index - rather than having to sell up if the pound falls further. That'd be sensible risk management.