FXStreet (Bali) - Kit Juckes, Head of FX Strategy at Societe Generale, notes that the Sterling has been a very annoying currency, but is finally falling, and he expects now a 3-year GBP/USD bear trend to develop.

Key Quotes

"The combination of the softness of UK wage growth and the perception of dovishness from the Bank of England Governor’s comments at the Inflation Report press conference, have seen markets completely reverse the rate re-think Mr Carney prompted with his comments at the Mansion House in June. December 2014 short sterling is at its highest level since the morning of that event.” It could happen sooner than markets currently expect” was what he said on 12 June about the timing of the first rate hike. Well, markets listened, responded and have now listened some more and taken back their initial position. Forward micro-guidance has a slightly tarnished reputation and the pound has fallen."

"There’s a better visual fit between UK/US rate spreads and the GBP/USD rate than is the case for most currencies over a long period. The currency correlates better with the 2–year spread than with policy rates or bond yields, and has tended to correlate better in recent years than previously. A simple correlation of the move in the last 12 months shows a 1% rise in relative rates ‘drives’ a 33-figure move in GBP/USD, on which basis, the18bp narrowing in the 2-year rate differential since it peaked at the start of July is ‘worth’ almost 6 figures of GBP/USD, i.e., from a peak close to 1.72 to around 1.66. The move we saw today, held up at 1.67, is close enough not to argue with. From here, we expect a further slow fall in the months ahead, while on a longer-term view, we expect GBP/USD to head into the lower half of its 1.50-1.70 range."

Related Articles
  1. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  2. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  3. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  4. Investing

    Financial News Comparison: Bloomberg Vs. Reuters

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  5. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  6. Forex Education

    The Top Uses For P2P Currency Exchange

    Peer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
  7. Forex

    Steps To Open An Offshore Forex Account

    Here is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
  8. Entrepreneurship

    Top Forex Trading Apps

    A brief overview of the top apps that help forex traders with on time information, charts and more.
  9. Investing Basics

    The Risks Of Buying Bitcoin

    Virtual currency is probably here to stay, but what about Bitcoin specifically? Does it have a first-to-market advantage? What are the risks involved?
  10. Forex News

    How The Forex "Fix" May Be Rigged

    When it comes to forex, some types of "fixes" are legal. But some really aren't.
RELATED TERMS
  1. No results found.

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!