Pound Advances to One-Month High as King Sees Rate Increases

By Morwenna Coniam
Oct. 21 (Bloomberg) -- The pound climbed to its highest level in a month against the dollar after Bank of England Governor Mervyn King said Britons should start preparing for interest-rate increases.
The U.K. currency also jumped against the euro and the yen after King, writing in an opinion piece published today by the Herald newspaper of Scotland, said rates will rise "at some point" and "it would be wise to take this into account."
The Bank of England is scheduled to publish the minutes of the Monetary Policy Committee’s Oct. 8 meeting at 9:30 a.m. in London today.
"King is turning and so is the pound," Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd., wrote in an e-mailed note. This is a "seismic shift in thinking at the Bank of England," he said.
The pound rose to $1.6499 as of 8:38 a.m. in London, from $1.6382 yesterday, and traded at $1.6516, its highest level since Sept. 17. Sterling also strengthened to 90.64 pence per euro, from 91.22 pence.

Damn are you serious? I just exited my pound position

got to wait for that pull back

I took all the profit on my long EURGBP as well... Don't fight a central banker

looks like we need to review the trading philosophies we have been going over (letting our profitable trades run etc)... unfortunately i haven't been able to follow the monetary policy story as well as my younger days. Been mostly trading charts. This is one of the instances where fundamentals trump technicals *sigh

Snapman wrote:

looks like we need to review the trading philosophies we have been going over (letting our profitable trades run etc)... unfortunately i haven't been able to follow the monetary policy story as well as my younger days. Been mostly trading charts. This is one of the instances where fundamentals trump technicals *sigh

kinda like the time when stevens just raised rates in austrailia...

currency realm still dominated by the central bank game! but it looks like BOE has some insight on inflation probably... so many be we will return to a rate led regime in the currency world??? hmmm thoughts to ponder on...

Snapman wrote:

Snapman wrote:

looks like we need to review the trading philosophies we have been going over (letting our profitable trades run etc)... unfortunately i haven't been able to follow the monetary policy story as well as my younger days. Been mostly trading charts. This is one of the instances where fundamentals trump technicals *sigh

kinda like the time when stevens just raised rates in austrailia...

currency realm still dominated by the central bank game! but it looks like BOE has some insight on inflation probably... so many be we will return to a rate led regime in the currency world??? hmmm thoughts to ponder on...

How long you let your profit run depends on your trading time horizon, taking a profit and playing the swing is not necessary unconsistent with the "let your profit run" thing. Anyway at some time you need to take the profit Now this being said, I did take some profits too early lately and it could be considered as a mistake as those profits takings could make the difference for my trading between a positive year and a (very) good year.
Now this said, I believe that EURGBP is strongly mean reverting and when you get close to parity, it tends to revert. Another thing : my rationale for going long was that BOE supported the GBP weakness, now it looks like it is not the case anymore so I don't have any reason to keep on being long. The situation needs to be reassessed now and I may come back to the pair.
Finally, regarding the central bank game, as discussed before I think that this has never stopped : QE and rates are a bit similar thing, the rates are the "prices" of a currency, the "QE" is its volume but their impact is pretty similar.

Sauros wrote:

Snapman wrote:

Snapman wrote:

looks like we need to review the trading philosophies we have been going over (letting our profitable trades run etc)... unfortunately i haven't been able to follow the monetary policy story as well as my younger days. Been mostly trading charts. This is one of the instances where fundamentals trump technicals *sigh

kinda like the time when stevens just raised rates in austrailia...

currency realm still dominated by the central bank game! but it looks like BOE has some insight on inflation probably... so many be we will return to a rate led regime in the currency world??? hmmm thoughts to ponder on...

How long you let your profit run depends on your trading time horizon, taking a profit and playing the swing is not necessary unconsistent with the "let your profit run" thing. Anyway at some time you need to take the profit Now this being said, I did take some profits too early lately and it could be considered as a mistake as those profits takings could make the difference for my trading between a positive year and a (very) good year.
Now this said, I believe that EURGBP is strongly mean reverting and when you get close to parity, it tends to revert. Another thing : my rationale for going long was that BOE supported the GBP weakness, now it looks like it is not the case anymore so I don't have any reason to keep on being long. The situation needs to be reassessed now and I may come back to the pair.
Finally, regarding the central bank game, as discussed before I think that this has never stopped : QE and rates are a bit similar thing, the rates are the "prices" of a currency, the "QE" is its volume but their impact is pretty similar.

Hey sauros you bring up a very intersting point about BOE not following weak pound anymore... what gives? I thought they were actually gonna go for a fundamental change? You think inflation is on the way?

Snapman wrote:

Hey sauros you bring up a very intersting point about BOE not following weak pound anymore... what gives? I thought they were actually gonna go for a fundamental change? You think inflation is on the way?

Now we need to be careful between what is said and what is done. Those guys master the impact their rhetoric can have on markets and King said the very opposite a couple of weeks ago. The other thing is the EURGBP had a consequent drop a few days ago : technically i think it was not a bad idea to get out, now we'll see...

Sauros wrote:

Snapman wrote:

Hey sauros you bring up a very intersting point about BOE not following weak pound anymore... what gives? I thought they were actually gonna go for a fundamental change? You think inflation is on the way?

Now we need to be careful between what is said and what is done. Those guys master the impact their rhetoric can have on markets and King said the very opposite a couple of weeks ago. The other thing is the EURGBP had a consequent drop a few days ago : technically i think it was not a bad idea to get out, now we'll see...

That is a good point, I was having a discussion with Batman in the Batcave, and i was pondering if they were just trying to get the sentiment in the markets priced in, also commercial real estate and housing situation in the UK is still blatantly terrible, i don't see how they can raise rates anytime soon... the "King" of big talkers eh...

Snapman wrote:

Sauros wrote:

Snapman wrote:

Hey sauros you bring up a very intersting point about BOE not following weak pound anymore... what gives? I thought they were actually gonna go for a fundamental change? You think inflation is on the way?

Now we need to be careful between what is said and what is done. Those guys master the impact their rhetoric can have on markets and King said the very opposite a couple of weeks ago. The other thing is the EURGBP had a consequent drop a few days ago : technically i think it was not a bad idea to get out, now we'll see...

That is a good point, I was having a discussion with Batman in the Batcave, and i was pondering if they were just trying to get the sentiment in the markets priced in, also commercial real estate and housing situation in the UK is still blatantly terrible, i don't see how they can raise rates anytime soon... the "King" of big talkers eh...

Hehe you see what happened ? the King of BS.
I'm back to my short GBP.

I created a new thread on GBP where you could continue our discussion : http://forum.thelordoftrading.com/the-bull-the-bear-and-the-ugly-spreader-trading-forum-f1/the-gbp-thread-t223.htm