Sterling fall shows rational alarm over Scotland

By Edward Hadas
September 8, 2014

The poll lead for Scottish independence may be unreliable, but the decline of the pound – now down 6 pct since July – prices in the realistic risk of trouble. A UK breakup would be fraught, the fiscal and economic damage significant, and the loss of European status definitive.

Dollar set to take pound’s strong currency title

August 6, 2014

Sterling became the FX market strongman during the past year as investors started to believe the UK would be the first big economy to raise rates. They may be right. Even so, shifting market expectations of when U.S. rates will be hiked now look set to boost the dollar.

“Seller beware” when profiting from market calm

July 10, 2014

Volatility, gauged by indicators like VIX, is ultra-low. While it could be the calm before a storm, investors including Pimco have been selling insurance against price swings. It’s one way to make money amidst shrinking yields, but it’s also a risky bet against the unexpected.

Can sterling hit $2? Only with a perfect storm

June 18, 2014

Having touched $1.70, the pound is on the brink of escaping its five-year range. A return to $2 looks like a fantasy right now. But a more hawkish BoE, a dovish Fed, a Scottish “No” to independence, and a narrowing of the UK’s twin deficits would do a lot to close the reality gap.

London gives BoE an emerging economy problem

April 23, 2014

Foreign capital inflows are supporting a housing bubble in London, and have helped push up sterling - even though the UK’s trade position is almost dire. An unbalanced economy is getting worse. As pre-crisis emerging markets learned, this is a problem with no easy solution.

Dollar to give other currencies beating many want

December 30, 2013

Currency market volatility will be pronounced in 2014. As the U.S. Fed cuts its asset purchases, the dollar looks set to climb from its current debased depths. The yen and the euro are keen to be beaten, emerging markets aren’t. The pound’s rise will rival the dollar’s.

Sterling flirts with safe-haven status

August 12, 2013

The pound has a lot against it, including dovish central bank rhetoric, but Britain is returning to growth as the euro zone struggles. And while the U.S. may soon taper QE, the UK has already parked the policy. The cheap British currency looks like a good bet.

UK inflation shows why Carney mustn’t sink pound

July 16, 2013

The new governor of the Bank of England may be tempted to push down the currency to push up growth. But with inflation at 2.9 pct, prices are rising much faster than wages. That’s now the chief obstacle to a decent UK recovery. Further devaluation would do more harm than good.

Carney in doesn’t mean pound down as QE heads out

June 10, 2013

The Bank of England’s new governor probably won’t be Mr. Easy Money. Even if he wants more quantitative easing and a cheaper currency, he’ll need to persuade a recalcitrant Monetary Policy Committee. And QE is going out of fashion. The pound looks a good bet as the UK picks up.

BoE’s King is caught in the trilemma trap

By Edward Hadas
March 15, 2013

The UK central bank governor has decreed that sterling has fallen far enough. That’s easy to say, especially as Mervyn King is on the way out. But currencies fall when monetary policy is inflationary and capital flows freely. Words only slow the decline, or discredit the speaker.