Today is Thanksgiving in the
US. This will mean a thin market in Forex. Apart from that we wish all our US
friends, and indeed everyone else, all the compliments of the day.
For the first time since the start of the latest dominant trend in Cable
(GBPUSD), which is downward, it looks like a weekly engulfing candle in the
opposite direction might be in formation (see chart above). Sterling has now
risen each day since the start of this week, which is itself effectively
shortened by the Thanksgiving holiday in the US today.
It is as yet too early to be definitive about this, but the incipient
signal is worth paying attention to. In terms of the fundamentals, we have
always taken the view that the economics of the UK are sound. The pound has
been subdued since the run-up to the Scottish independence referendum, and this
has been, frankly, on the back of confused messages from the authorities about
the imminence or otherwise of core interest rate rises.
Now a delay in such rises may have been well and truly priced in. If
this is so it leaves a move up as the only real prospect for the UK unit. This
has the potential to be an accelerated one when and if the chatter about rate
rises resumes.
Constancio adds to ECB
sovereign bond talk
Vitor Constacio, Vice President of the European Central Bank,(who can be
seen in his monthly press conferences sitting alongside Mario Draghi) has added
his voice to those who seem to be preparing the ground for the purchase of
sovereign bonds by the ECB next year, as a further plank in their strategy of
what amounts to Quantitative Easing (QE).
This took place in a speech in London yesterday. The main target of the
move will be German Bunds. This is appropriate, as Germany is by far the best
performer in the Eurozone, but also ironic, because that country’s central bank
president, Jens Weidmann, is one of the foremost critics of anything
that might tend to increase inflation, as such purchases will undoubtedly do.
The ECB still has to overcome German opposition to its efforts in this regard,
and that is by no means a foregone conclusion.
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