Breakdown: The dismal art of forecasting sterling

October 14, 2016

Most economists agree the pound has further to fall, but there is a wide range of views on how far. Long-term forecasts are an unfortunate necessity, but they are stab in the dark when it comes to a currency that is more in the thrall of politics than economics.

British retailers have leverage over Unilever

October 13, 2016

The maker of Dove soap wants supermarkets like Tesco to pay more for its goods as the pound weakens. They can’t easily pass that cost on to shoppers. Grocers have two reasons to play tough: Unilever's 15 pct operating margin, and their access to the consumer.

Sliding sterling is a long way from a crisis

October 4, 2016

The pound has fallen to 31-year lows below $1.28. That’s hardly a disaster. Buoyant UK bonds and stocks suggest there are few concerns about Britain’s hefty budget and current account deficits. It would take a much steeper drop to worry Bank of England Governor Mark Carney.

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.