Market News The prospect of interest rate hikes has been questioned again, and the pound bears are pointing to the lows of the year
The prospect of interest rate hikes has been questioned again, and the pound bears are pointing to the lows of the year
In the early European market on November 23, the pound was basically stable against the dollar. The pound is currently trading below $1.34 against the dollar, slightly higher than the 2021 low of $1.3353 hit earlier this month. Over the past six months, the British pound has fallen by more than 5% against the U.S. dollar. From the perspective of analysts, the currency pair is still in a downward trend in the market outlook, and doubts about the Bank of England's December interest rate hike have cast a doubt on the outlook for the pound. New shadows.
2021-11-23
9713
On Tuesday (November 23) in the European market in early trading, the pound was basically stable against the US dollar. The pound is currently trading below US$1.34 against the US dollar, slightly higher than the 2021 low of US$1.3353 hit earlier this month. Over the past six months, the British pound has fallen by more than 5% against the U.S. dollar. From the perspective of analysts, the currency pair is still in a downward trend in the market outlook, and doubts about the Bank of England's December interest rate hike have cast a doubt on the outlook for the pound. New shadows.
Investors have increasingly negative views on the pound. Although the pound is close to the low point of the year, they are still betting that the decline will continue. The latest data from the US Commodity Futures Trading Commission (CFTC) show that hedge fund short positions are at their highest level since December last year, while institutional investors’ short positions have reached their highest level in more than two years.
(Institutional investors' short positions have reached the highest level in more than two years)
(Since the beginning of June, the pound has fallen by more than 5% against the dollar)
This pessimism can be attributed to a mixed factor of domestic and international challenges to the UK. There are signs that the Fed will speed up the reduction of its emergency stimulus plan, and the pound will therefore be affected by the bullish sentiment of the dollar. At the same time, people are skeptical about whether the Bank of England will raise interest rates in December, and even worry that austerity policies will harm the economic recovery.
Jane Foley, head of foreign exchange strategy at Rabobank, said: “The increase in short positions may indicate that given the COVID-19 pandemic and Brexit uncertainty, as well as the lingering fears that short-term interest rate hikes may be a policy error People are anxious about Britain’s growth prospects."
The Bank of England kept its benchmark interest rate at 0.1% this month, which surprised the market. Although investors now expect the central bank to raise interest rates in December, the Bank of England Chairman Bailey and Chief Economist Peel have cast a shadow over this expectation in recent days. This uncertainty has prompted option traders to seek protection. The cost of hedging volatility for a month is hovering near the highest level since March.
The two top officials of the Bank of England questioned the certainty of interest rate hikes in December, pointing out that the decision to raise interest rates needs to achieve a delicate balance.
Bank of England Governor Bailey (Andrew Bailey) said that the current risks facing the British economy are "twofold", that is, slowing economic growth and rising inflation. This echoes the comments made by Chief Economist Peel on Friday.
Bailey also emphasized that if the effects of the second round of inflation, especially on wages and labor markets, begin to penetrate into price increases, the Bank of England will have to take action. In a week, the British inflation rate reached its highest level in a decade. An official report showed that the British labor market was tightening, but neither Bailey nor Peel said that this was a cause for concern.
Although Bailey said that his remarks are consistent with his remarks in October, but his tone is more cautious than his remarks before the Bank of England meeting earlier this month. Earlier, Bailey stated at the G30 meeting that the Bank of England would "have to take action" to curb inflation. Since then, investors have quickly digested expectations that borrowing costs will rise for the first time since the epidemic.
On November 4, policymakers kept interest rates unchanged, which caught investors off guard. Since then, Bailey has tried to emphasize that there are still prerequisites for the decision to raise interest rates early, and Peel further strengthened this view on Friday. These remarks make people wonder whether the Bank of England will raise interest rates at its next meeting on December 16, and financial markets have digested this expectation.
The situation in February next year has also attracted much attention. The biggest question is whether the Monetary Policy Committee will increase the cost of borrowing to 0.5% by then. By then, policymakers may let 875 billion pounds (US$1.2 trillion) of British government bonds mature in the asset purchase plan. Withdraw from the portfolio without replacement. Last Friday, the currency market was betting that the key interest rate would be about 9 basis points below this level.
(Investors expect the Bank of England interest rate to fall below 5% in 3 months)
Bailey and Peel highlighted factors that may give policymakers a reason to suspend their actions. These factors include the slowdown in the pace of economic recovery and that inflation caused by rising energy prices cannot be resolved by raising interest rates. In addition, it may take time to assess whether the expectations of future inflation levels will reach the level of affecting financial markets, or whether inflation levels are penetrating into the overall economy through rising wages.
Stephen Gallo, director of European currency strategy at Bank of Montreal, said the pound may fall to as low as $1.29 in the next two months, a drop of nearly 4% from current levels. He said: "The UK is greatly affected by global economic trends. There are signs that obstacles in the supply chain are beginning to ease, but overall, economic headwinds seem to have increased."
(Britain's GDP is more different than before the epidemic, and some major economies are even bigger)
However, there is still some good news for the British pound. According to the risk reversal indicator, which measures market positions and sentiment, the bearish sentiment of option traders for the next three months has eased since early November. Strategists at Bank of America, Rabobank and Societe Generale SA all believe that the euro will basically remain at $1.34 at the end of this year.
But Jeremy Stretch, head of foreign exchange strategy at the G-10, Canadian Imperial Bank of Commerce, said that due to the strengthening of the U.S. dollar and the uncertainty surrounding the Bank of England, the bank had a few weeks ago Lowered its year-end estimate from $1.38 to $1.33. Nomura International Strategist Rochester said the bank had made the same prediction.
(Pound against the U.S. dollar daily chart)
GMT+8 15:56 on November 23, the pound against the US dollar reported 1.3402/00
The Bank of England intensifies the uncertainty of interest rate hikes, investors dump the pound
Investors have increasingly negative views on the pound. Although the pound is close to the low point of the year, they are still betting that the decline will continue. The latest data from the US Commodity Futures Trading Commission (CFTC) show that hedge fund short positions are at their highest level since December last year, while institutional investors’ short positions have reached their highest level in more than two years.
(Institutional investors' short positions have reached the highest level in more than two years)
(Since the beginning of June, the pound has fallen by more than 5% against the dollar)
This pessimism can be attributed to a mixed factor of domestic and international challenges to the UK. There are signs that the Fed will speed up the reduction of its emergency stimulus plan, and the pound will therefore be affected by the bullish sentiment of the dollar. At the same time, people are skeptical about whether the Bank of England will raise interest rates in December, and even worry that austerity policies will harm the economic recovery.
Jane Foley, head of foreign exchange strategy at Rabobank, said: “The increase in short positions may indicate that given the COVID-19 pandemic and Brexit uncertainty, as well as the lingering fears that short-term interest rate hikes may be a policy error People are anxious about Britain’s growth prospects."
The Bank of England kept its benchmark interest rate at 0.1% this month, which surprised the market. Although investors now expect the central bank to raise interest rates in December, the Bank of England Chairman Bailey and Chief Economist Peel have cast a shadow over this expectation in recent days. This uncertainty has prompted option traders to seek protection. The cost of hedging volatility for a month is hovering near the highest level since March.
Bank of England governor and chief economist questioned the December rate hike
The two top officials of the Bank of England questioned the certainty of interest rate hikes in December, pointing out that the decision to raise interest rates needs to achieve a delicate balance.
Bank of England Governor Bailey (Andrew Bailey) said that the current risks facing the British economy are "twofold", that is, slowing economic growth and rising inflation. This echoes the comments made by Chief Economist Peel on Friday.
Bailey also emphasized that if the effects of the second round of inflation, especially on wages and labor markets, begin to penetrate into price increases, the Bank of England will have to take action. In a week, the British inflation rate reached its highest level in a decade. An official report showed that the British labor market was tightening, but neither Bailey nor Peel said that this was a cause for concern.
Although Bailey said that his remarks are consistent with his remarks in October, but his tone is more cautious than his remarks before the Bank of England meeting earlier this month. Earlier, Bailey stated at the G30 meeting that the Bank of England would "have to take action" to curb inflation. Since then, investors have quickly digested expectations that borrowing costs will rise for the first time since the epidemic.
On November 4, policymakers kept interest rates unchanged, which caught investors off guard. Since then, Bailey has tried to emphasize that there are still prerequisites for the decision to raise interest rates early, and Peel further strengthened this view on Friday. These remarks make people wonder whether the Bank of England will raise interest rates at its next meeting on December 16, and financial markets have digested this expectation.
The situation in February next year has also attracted much attention. The biggest question is whether the Monetary Policy Committee will increase the cost of borrowing to 0.5% by then. By then, policymakers may let 875 billion pounds (US$1.2 trillion) of British government bonds mature in the asset purchase plan. Withdraw from the portfolio without replacement. Last Friday, the currency market was betting that the key interest rate would be about 9 basis points below this level.
(Investors expect the Bank of England interest rate to fall below 5% in 3 months)
Bailey and Peel highlighted factors that may give policymakers a reason to suspend their actions. These factors include the slowdown in the pace of economic recovery and that inflation caused by rising energy prices cannot be resolved by raising interest rates. In addition, it may take time to assess whether the expectations of future inflation levels will reach the level of affecting financial markets, or whether inflation levels are penetrating into the overall economy through rising wages.
Although the bearish sentiment has eased slightly, the pound against the dollar is expected to fall to $1.33 at the end of the year
Stephen Gallo, director of European currency strategy at Bank of Montreal, said the pound may fall to as low as $1.29 in the next two months, a drop of nearly 4% from current levels. He said: "The UK is greatly affected by global economic trends. There are signs that obstacles in the supply chain are beginning to ease, but overall, economic headwinds seem to have increased."
(Britain's GDP is more different than before the epidemic, and some major economies are even bigger)
However, there is still some good news for the British pound. According to the risk reversal indicator, which measures market positions and sentiment, the bearish sentiment of option traders for the next three months has eased since early November. Strategists at Bank of America, Rabobank and Societe Generale SA all believe that the euro will basically remain at $1.34 at the end of this year.
But Jeremy Stretch, head of foreign exchange strategy at the G-10, Canadian Imperial Bank of Commerce, said that due to the strengthening of the U.S. dollar and the uncertainty surrounding the Bank of England, the bank had a few weeks ago Lowered its year-end estimate from $1.38 to $1.33. Nomura International Strategist Rochester said the bank had made the same prediction.
(Pound against the U.S. dollar daily chart)
GMT+8 15:56 on November 23, the pound against the US dollar reported 1.3402/00
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