Ready-reckoning the markets post-UK election

April 29, 2015

Next week’s British general election is unlikely to produce a clear winner. But a government will eventually be formed, even if it takes a second vote. Different medium-term trends will emerge after the inevitable short-run volatility in sterling, gilts and UK-listed stocks.

Sterling fall shows rational alarm over Scotland

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.

Against the euro, the pound looks sound

April 5, 2012

Britain’s economy probably grew 0.5 percent in the first quarter. That’s a big improvement on Q4 - and a lot better than the euro zone. UK inflation is stubborn too, making further rounds of money printing less likely. It all bodes well for sterling against the euro.

Euro faces slide on break-up risks

May 10, 2012

The single currency has held up remarkably well thus far. But a more hasty retreat against the dollar, pound and yen is on the cards. A Greek exit poses the chief near-term risk. Any resulting contagion will be hard to handle because of the divide between France and Germany.

The pound’s climb may send the UK down

May 16, 2012

Sterling has risen against the euro, just when a weak Europe is holding back UK exports. The pound will climb much further if Greece triggers a still more serious euro crisis by leaving the single currency. It’s a big risk for the UK, which policymakers can do nothing about.

Moody’s shaming brings UK gain in currency war

February 25, 2013

The loss of triple-A is humiliating, but that’s now history. The lingering effect of Moody’s action is a weaker pound, and that should serve to stimulate exports, GDP growth and inflation. If so, there’s less risk of unlimited BoE money printing when Mark Carney takes charge.