Sterling level ignoring Brexit factors
As I reported on Friday I am and remain short of Sterling as the market goes through its normal phase of ignoring Brexit and becoming irrationally optimistic while there are no negative comments from either side.
Theresa May was in Berlin on Friday for talks with Angela Merkel. The Chancellor is finding her European feet again following the long and debilitation talks to agree a grand coalition in Germany. The joint press conference was full of pleasantries but nothing of substance to break the logjam over the transition or future relationship.
The clock is now definitely ticking as we will soon enter the final year of the negotiations. It is probable that we are expected to believe that since there have been no official comments that everything is proceeding serenely behind closed doors. Unfortunately, experience tells us something very different.
I will stay short of Sterling because when the official comments start again they aren’t likely to be supportive.
BoE Governor Mark Carney is making a speech today. If he mentions monetary policy at all, he is most likely to clarify the MPC’s vision of interest rate rises being gradual and well-spaced.
Euro sellers protecting 1.2520.
The rally in the common currency ran into heavy selling pressure on Friday. As the transition between the Asian and European sessions took place a large buy order triggered stop losses above 1.2520 but failed to consider sellers on the approach to 1.2550. The result was quite violent although the retracement back to the low 1.24’s took most of the day as weak buyers were seen punctuation the fall with orders at 1.2480, 1.2460 and 1.2440.
This week sees sentiment indexes released in the Eurozone which should, in the main be supportive. However, it is the dollar that is casting the largest shadow over the market now with a lack of momentum being either a rally or a correction bringing choppy trading where it is difficult to hang on to a position with any certainty.
Long term the Euro will rally back towards 1.3000 but it will take a sea-change in the attitude of the ECB to accept that monetary policy needs to be tightened and the Asset Purchase Scheme removed. Wholesale weakness in the dollar however will concern the buyers of U.S. debt which will lead to higher rates.
Bitcoin recovery brings out the optimists and charlatans
I generally try to avoid talking about cryptocurrency since I consider myself to be an interested amateur and cannot speak with any authority or deep understanding. I do, however, follow the price of Bitcoin since I am the proud owner of a very small investment.
Therefore, the recovery in the price over the past week has been encouraging but has led to typically hysterical calls from those long at very ugly levels that it is back on its way to $50,000 or some similarly ludicrous level.
When this happens, the rumours are usually driven by those with an ulterior motive; they either have a position themselves and encourage buying to push the price up or they have a financial incentive to bring fresh buyers to the market.
I read an interesting comment yesterday. The writer said that the price of Bitcoin versus FIAT currencies is irrelevant since it is a replacement not a substitute for non-digital money. Hence the only time the price is relevant is when you buy bitcoins to use. The only problem with that premise is that for now it is still considered a get rich quick tool.