Discuss the GBP/USD with a DailyFX Analyst - Page 128 - DailyFX Forex Forum

davetheeagle · #**1906** (**permalink**) 01-23-2008, 02:57 AM

I can't understand how the market can be looking for a rate cut next week. Surely the 3/4% cut yesterday covers it for this month at least.

Interesting comments from Mervyn King that the UK faced a period of 'above-target inflation'. Terri is right about UK cuts in interest rates not matching expectations.

Terri Belkas · #**1907** (**permalink**) 01-23-2008, 04:22 AM

Quote:

Originally Posted by davetheeagle

I can't understand how the market can be looking for a rate cut next week. Surely the 3/4% cut yesterday covers it for this month at least.

Interesting comments from Mervyn King that the UK faced a period of 'above-target inflation'. Terri is right about UK cuts in interest rates not matching expectations.

It looks to me like Bernanke flinched and the Fed is in full-on panic mode, so while I can't see the rationale for another cut next week, it wouldn't surprise me.

I think this morning's BOE minutes (in 10 min) will be key to judging the bank's bias and could help roll back some of the speculation of a February rate cut. I believe the consensus for the minutes is a 7-2 vote to keep rates steady in January. Market reaction may be based more upon commentary, though something like an 8-1 vote could lead Cable to spike higher.

davetheeagle · #**1908** (**permalink**) 01-23-2008, 04:35 AM

A convincing 8-1 victory then! Must read the full minutes now.

Terri Belkas · #**1909** (**permalink**) 01-23-2008, 04:46 AM

Quote:

Originally Posted by davetheeagle

A convincing 8-1 victory then! Must read the full minutes now.

Here's a little write-up I just did. Full minutes are available on the BOE site: http://www.bankofengland.co.uk/publi...2008/index.htm

The minutes from the Bank of England's January meeting showed that the monetary policy committee's decision to leave rates steady at 5.50 percent was an 8-1 vote. Unsurprisingly, the one MPC member to vote for a cut was über-dove David Blanchflower - who has been in favor of making policy more accomodative during the past four meetings - as he argued that a the UK faces a "greater risk of a sharp slowdown." Meanwhile, the minutes of the meeting also showed that the BOE is becoming very concerned about inflation, as their outlook has "worsened markedly" amidst rocketing energy and food costs, as well as the drop in the British pound from the November highs, as import prices will likely rise (e.g. oil). Though it is clear that the downside risks to growth loom large, especially as Q4 GDP eased to 2.9 percent (annual) from 3.3 percent in Q3 amidst a deterioration in the housing and retail sectors, the prospects of CPI breaching the 3.0 percent level once again will likely prove too daunting to allow BOE Governor Mervyn King to cut rates again in the near-term.

davetheeagle · #**1910** (**permalink**) 01-23-2008, 05:02 AM

Terri,

Thanks for that. The £ tried its best but the markets appear hungover today after recent events. However, everything is pointing to the £ being supported at current levels. Must admit you can feel those inflation pressures over here in the UK whichever way the government decides to cut and dice the numbers to make them more palatable.

As mentioned previously petrol is now definitely over £1 a litre, gas and electricity prices are rising by 15%, council tax bills are likely go up by 4 to 5%. Food is more expensive since the run-up to Christmas.

Of course sofas and 50" TVs are cheaper if you want them.

Terri Belkas · #**1911** (**permalink**) 01-23-2008, 05:09 AM

Quote:

Originally Posted by davetheeagle

Terri,

Thanks for that. The £ tried its best but the markets appear hungover today after recent events. However, everything is pointing to the £ being supported at current levels. Must admit you can feel those inflation pressures over here in the UK whichever way the government decides to cut and dice the numbers to make them more palatable.

As mentioned previously petrol is now definitely over £1 a litre, gas and electricity prices are rising by 15%, council tax bills are likely go up by 4 to 5%. Food is more expensive since the run-up to Christmas.

Of course sofas and 50" TVs are cheaper if you want them.

I can't imagine that the lower Q4 GDP figures are helping GBP much, but I think the minutes should carry a little more weight. I could be wrong, but for the next few hours (at least), my bias for Cable is to the upside.

JohnR · #**1912** (**permalink**) 01-23-2008, 08:16 AM

The pair has been on a steady decline since the GDP numbers came out. Looks like the market isn't quite ready to believe the BoE hype.

studentforex · #**1913** (**permalink**) 01-23-2008, 12:13 PM

JohnG I very impress with your analysis espasialy your technical assesment with exect time frame, for pull back.

JohnG you wrote, that i udestand , for resent pull targeted 1.9680 and next 2.0099. if i wrong so please correct it .its my pleasser if i get possible swing point becouse i stuck in some buys that on above of possible price pull.

i aske about the 1.8700 bottom of long trem bullish chennal in my view ask above, that figer i see only in your post

please answer

thaks

John Kicklighter · #**1914** (**permalink**) 01-23-2008, 03:31 PM

Quote:

Originally Posted by davetheeagle

I can't understand how the market can be looking for a rate cut next week. Surely the 3/4% cut yesterday covers it for this month at least.

I agree that it seems amazing that the FOMC could be contemplating another rate cut one week after a surprise 75 bp easing; but this may be the first leg in a grander scheme. This unscheduled decision came along with Treas. Secretary Henry Paulson's assurances of a temporary economic stimulus package. This is a considerable one-two punch for market participants to take a step back and really think about the help that is being delivered to curb the chances for a recession. If this shows any progress, an additional 50 bp cut could effectively jump start confidence in the economy (not to mention, I'm sure they are eager to see the effects of this aggressive policy adjustment, and will want to wait and see).

On a different line of thinking, I don't think we will need to price in as much risk of a volatile reaction to the rate decision as we were a week ago, seeing as how the market was relatively controlled after the surprise hike.

Looking at price action, the confluence of fibs between 1.96/95 seems to no longer be a major technical barrier. Now I'm looking at the steep, falling trend channel/wedge. That will define my outlook on the pair for now.

WhatCount · #**1915** (**permalink**) 01-24-2008, 07:07 AM

Quote:

Originally Posted by JohnG_FX

Morning all,

No change since yesterday. my next ITD high is still not due for a couple of days so I stay with yesterdays views.

I'm running with us now in a 3rd minor wave up with 9768 being the minimum target, the next level up would be the 138.2 extension coming in at 9896 which also corresponds with the TL that John Kicklighter refers to, there will definately be a reaction there of some sorts.

This move up on cable is partly due to the relief rally on the equities yesterday which has given the high yielders a bit of a boost due to buying on the Yen crosses.

S&P500 approaching the muti month 1,370 breakdown level (futures curently holding around the 1,330/40 level) and if the market sells off again in the US session those Yen pairs are going to start having an effect again.

Also affecting cable is the pullback on EURGBP, Trichet towing the hawkish line and reiterating the upside risk to inflation, however the markets not fully believing that there will be room for rate increases given the potential growth slowdown. Personaly I think they will be on hold through Q1 at least.

BOE between a rock and a hard place - King confirming that CPI will probably break 3.0% in the short term, growth certainly slowing but not as quickly as some had anticipated. I would like to see the MPC hold next month. Oil, food. gas, transport costs all going a lot higher in the UK and feeding through to inflationary pressures. much more important in my view to contain those than pander to individuals who have overextended credit on inflated house prices.

Cutting rates will not necessarily help business, the pound is going to de-value over the next 2-3 months against the euro anyway which helps the exports.

Heads up on the UK Carlsberg bid for UK S&N, second line of funding for that due to go through by 1200gmt today which will keep GBP supported through this morning.

John

Really enjoyed reading your informative posts.

You mentioned EUR/GBP weighing on cable. On the note how much longer can JCT and ECB hold out before buckling to the global economy? Sooner or later they will have to admit that there growth is being dampened. I cant see a rise from them but surely neutral stance is required soon? I feel they will have to cut at some point, Barclays came out with a report stating that they expect a cut by the ECB at the March meeting.

On the point of EUR/GBP i am stuggling with this one at the moment, are we still in a larger wave 3 or is the wave 3 top in? Are we still in wave 4 or is that done and are we in wave five. Your help would be much apreciated.

Please post a chart if you can,

with kind regards and thanks in advance.

davetheeagle · #**1916** (**permalink**) 01-24-2008, 10:53 AM

Can you continue to update this story on a hourly basis until we do hit 2.00:

Latest News:

13.38 GPBUSD Headed For A Test of 2.00

14.30 GBPUSD: Headed Back to 2.00

Many thanks.

WhatCount · #**1917** (**permalink**) 01-24-2008, 10:57 AM

Quote:

Originally Posted by JohnG_FX

Hi WhatCount,

Unfortunately I don't do a count on EURGBP as for the last couple of years until last September there wasn't really enough movement outside the 0.6600-0.7000 range, the two curencies and CB policies were roughly in step.

However looking on a weekly EURGBP chart to my eyes we have ST/MT top in with a first pullback level target in the 0.7200/7240 but beyond that I wouldn't like to try and call it.

As far as the ECB is concerned they have a similar problem to the BOE, Trichet is fully aware that due to the diverse nature of the countries making up the Euro it's imperative that inflation is kept down for the longer term stability of the Union. Sarkozy et al will continue to complain that rates are too high but Trichet (as indeed do the BOE) needs to stay away from political pressures.

Yes growth slowdown is going to be a problem, but as Sorros said yesterday "you can't have half a decade of above average growth and not expect a correction" yes it's going to be uncomfortable for everyone but economics dictates that we are constantly in cycles.

German IFO came in hotter than expected this morning and UK GDP yesterday also above consensus -

Sorry if all this seems a bit non commital, bottom line....... yes I think ECB and BOE will have to cut at some stage in Q1-2 and probably BOE will go first,

As far as Barclays is concerned I don't pay a lot of attention to what "Expert analysts" etc say, it's a guaranteed way to be caught on the wrong side of the market

Thanks John

yes i do agree we get a pull back at some stage, buts still a confusing count.

Agreed with what you say re CB's. But JCT still not seeing the wood for the trees.

Anyone else here want to have a stab at the count? would be much welcomed..

regards

Whatcount

majali.odai · #**1918** (**permalink**) 01-24-2008, 12:25 PM

the sterling has been messing with us for the past few weeks.... but where is it going? i was expecting it to fall back to 1.8670 but with this movement now i think it's going back to 2.0100.. i sold the sterling at 1.9680 and now am trapped in a dangerous sell. i don't know what to do or expect. i appreciate any advices thank you.

djindyfx · #**1919** (**permalink**) 01-24-2008, 02:28 PM

Quote:

Originally Posted by majali.odai

the sterling has been messing with us for the past few weeks.... but where is it going? i was expecting it to fall back to 1.8670 but with this movement now i think it's going back to 2.0100.. i sold the sterling at 1.9680 and now am trapped in a dangerous sell. i don't know what to do or expect. i appreciate any advices thank you.

Majali... I don't want to be harsh but, the market will be harsher.... Learn to use STOPS! They will keep you out of these predicaments.. I don't know how you trade but... My signals are showing that the pound is in a range trade mode... ADX is below the 16 mark. That means it is not in a trend. It is going to be really choppy until the ADX gets above 20+. There is no crystal ball to tell you if the Market is going to come back to your 1.9680 point. If I were you.. I would take the 70pip loss but.. That is just me. It is your money.. I like to have money left in my acocunt to be able to trade tomorrow. That is why I use stops. If I am wrong (which I am the majority of the time) then my stop takes me out for little losses.

majali.odai · #**1920** (**permalink**) 01-24-2008, 03:04 PM

thnx for the harsh advice djindy ;p i hate stops, i never use them unless am going to sleep, i lost many golden opportunities because of them, anyways i closed the sell at 1.9698 and lost only 18 pips, and bought right away... thnx again