The expectations for a U.S. rate cut remain strong, with a sense of hesitation ahead of pound selling [from Mr. Rikio Shima's email newsletter]
From the investment newsletter “Shima Rikio’s Practical Real-time Trades” by Shima Rikio, provided by GogoJungle, here is a small excerpt from today’s issue.
Yesterday it was a one-man show for selling the pound. However, a 100-point swing in GBPUSD feels solitary; it’s a sign that other currency pairs aren’t moving much.
Fed Chair Jerome Powell stated that actions would be taken “appropriately,” confirming a rate cut, but there was almost no reaction. The market has grown accustomed. As of July 31 FOMC, a 0.25% rate cut is priced in at about 70.5%, and a 0.5% cut at about 29.5%; more people are considering a 0.5% cut than expected, but the currency market remains “stable.”
Regarding the pound, it fell as both Boris Johnson and Jeremy Hunt supported scrapping the backstop clause, leading to speculation of a near “no-deal Brexit.” However, what actually happens depends on the decision of the new prime minister and talks with the EU once they begin, which has not yet happened. In that sense, it is a bit ahead of itself. The pound can be volatile if you hold a short position at very low levels, so I’d prefer to wait for a rebound.
Today there are no major events. After this, US housing indicators and Canada’s CPI seem likely. There will also be the Beige Book release, which will confirm the strength of the US economy.
Yesterday the euro/ dollar fell, but I think it was largely dragged by the pound/dollar. However, it was disappointing that it did not exceed 1.1300. Will the range continue? The pound/dollar position in the IMM currency futures market also suggests this, but since there are some short positions building up, once a pullback begins there could be a fairly strong rebound.
“Shima Rikio’s Practical Real-time Trades” (Shima Rikio)quote.
Yesterday was a one-man show for selling the pound, but until the UK’s new prime minister is decided and negotiations with the EU begin, it seems the direction hasn’t set yet. If expectations for BOE rate cuts strengthen, it may fall further. (Editorial staff)
