- Sterling at 7 year low against USD
- GBP rebounds after knee jerk sell off
- BoE governor's Brexit comments awaited
As you will no doubt have read elsewhere, the Pound fell briefly to a 7 year low against the US Dollar yesterday and had a rip-roaring buckaroo ride against most currencies. Interestingly though, Sterling found support at the bottom of those dips as the knee-jerk reaction to Boris Johnson's announcement that he was supporting the 'Out' campaign in the EU referendum started to be seen for the inevitable announcement that it was. To a large degree, whilst Sterling did dive, it stayed within medium term trading ranges as traders were clearly watching their charts and seeking signs that the selloff had run its course. Sterling is back to roughly where it started the day yesterday against the Euro and has recovered against the USD and CAD but the Australasian currencies are still offering great GBP buying opportunities.
Today's big news is the visit by the Governor of the Bank of England to the Treasury Select Committee. I am sure Brexit is on the agenda and there will probably be comments on it from the BoE's chief economist when he speaks this afternoon at the University of Nottingham.
We will also see German economic growth data and the IFO institute's business sentiment indices. A slight decline in sentiment is most likely.
This afternoon brings US existing home sales numbers and a flurry of Federal Reserve talking heads. The Dollar is pressing down against the Pound at levels not seen since 2009 but there are plenty of GBP buyers at this level...for now. On any measure, the Pound is oversold at this point but it could become even more oversold if the pace of the EU exit campaign gathers pace.
It is not that traders believe Britain can't function as an independent state; it is more a case of uncertainty over trade deals, access rights and protectionism that makes the Pound fall when a Brexit is more likely. I have read dozens of articles over the last few days, all professing to know what is likely to happen if the UK votes to go it alone outside the EU but no one really knows. The only certainty is uncertainty and that breeds volatility. The next few months will either be exciting or terrifying dependant on your penchant for the uncertain and those who fear the worst ought now to be making plans for risk protection.
Those plans might include forward contracts to secure currency at current rates, stop loss orders to avoid further loss if the Pound goes to hell in a handcart or maybe, if cash allows, just buying and holding currency to meet your needs. Whatever your plans, it is always worth considering the options open to you.
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Other than that, this debate is at least going to be entertaining. When Boris Johnson stood up to speak in the House of Commons yesterday, he was met with hecklers asking him to tuck his shirt in and when Jeremy Corbyn started an anecdote with the line, "When I met members of the socialist groups in Brussels, they asked me"..." he was interrupted by someone shouting "Who are you." These are the people who run our country. Gawd 'elp us guv.
An elderly chap goes to the Doctor to complain about a pain in his right leg. The Doctor examined him and then sat back down saying, "Well I am sorry to say there is nothing I can do. It's just old age and we all have to deal with these things at some stage."
"Well what kind of quack medicine is this?" says the old man. "You clearly don't know what you are talking about."
"How can you be so sure I am wrong?" says the Doc.
"Well my left leg is fine and that is exactly the same age."
Quick silly joke
What was Beethoven's favourite fruit?
FX Research by David Johnson