Who would have predicted that?

[Suff]

As you know, I watch the currency fluctuations on a daily basis. It is relevant to me because I live in two currency zones. So knowing what the £ is worth on a daily basis is important.

So, imagine my surprise, or lack of it, when I get into work this morning and find the £ is at $1.26 and €1.16 respectively.

Who would have predicted that? Well I did. Not just last week or after Trump won, but back in July when I said the UK economy was strong, the BOE was lying for political reasons and that when the markets worked it out the £ was going to rise and rise rapidly.

The people I feel sorry for are those who have made strong business plays with the rest of the world based on predictions of extended £ weakness. Surely they had the common sense to hedge their currency exposure for at least 6 months when it was low. Or perhaps they didn't because they expected it to drop more. This is how Zavvi went under after buying out the incredibly profitable Virgin Megastores.

Ah well. I'm sure we will see another drop in the £ around March, but the long term trend is a divergence between the ailing Euro Zone economies and the British economy and that can only mean a stronger £. Especially now that the BOE are going to be forced into raising rates back to 0.5% sooner than they want to. Although, perversely, the strengthening £ will hold that off for a little longer.

I do find it interesting that the expectation of a rate rise is the very thing that extends the duration before the rate rise happens.

BTW did anyone note that the Trump team is talking about dropping corporation tax to the 15%-20% bracket? More woes for the EU as companies and investment will flood back to the US if they achieve it. Although what is to stop Trump? He will hold all three branches of Government and the Republicans are a small government, low taxation party.

For reference US corporation tax is currently 35%

[Workingman]

Too much going on at the present to define it as short-term, long-term or medium term. It is what it is and could go any which way.

The only certainty is that the spivs have to make some moolah somehow.

[Suff]

The independent has the £ as the best performing major currency in the world right now.

God I bet it hurt them to write that one. Firstly that the £ is a major world currency and secondly that it is doing so well.

Plus the tacit admission that they were playing the £ down deliberately.

“There is just a bigger theme now and we just don’t have a trigger for more pound downside here,”

Poundsterling live has a very interesting statement about what is driving the current trend.

That the Pound was already far below where it should have been based on bond yield differentials has caught market attention and they are quickly racing to reprice the currency higher.

As I have been saying for a while, the truth will out. The £ is bouncing around the £1.16 mark with the € with speculators trying to drive it down, but they're losing. There is way too much speculation out there that the UK is undervalued for them to win that one. It's like the Government trying to beat Soros over the ERM.

More choppy water coming soon.