Archives of “pound sterling” tag

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Big week coming up for the pound

  
Analysis, Forex
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The near-term sentiment in the pound continues to be driven by odds of a BOE rate cut ahead of the 30 January policy meeting

  • 21 January – UK November average weekly earnings, unemployment rate
  • 21 January – UK December jobless claims change, claimant count rate
  • 24 January – UK January flash manufacturing, services, composite PMI
It is all about data, data, data for the pound this week. With the hot topic being a possible rate cut by the BOE, all eyes will turn towards the labour market report tomorrow and post-election PMI data later on Friday (⬆️).
Currently, odds of a 25 bps rate cut by the BOE on 30 January sit at ~70% – a key threshold that has historically seen the central bank take action when it comes to rate decisions.
GBP

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Deutsche Bank have raised their probability for a ‘no-deal’ Brexit to near 50%

  
Analysis, Forex
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The bank says sterling is not cheap and that GBP can go much lower

DB have raised the probability for a ‘no-deal’ Brexit to 45%.
The bank acknowledges that on long term valuation models (citing PPP and FEER models) GBP is close to fair value, but say political risk is skedded asymmetrically downwards. Short GBP/JPY “remains an excellent expression ” (adding that yen is ranking far cheaper across our suite of trade-based models )
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Weekly chart below:
The bank says sterling is not cheap and that GBP can go much lower

George Soros :Great Investor & The Ultimate Trader

  
  Education
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On September 16, 1992, Soros’ fund sold short more than $10 billion in pounds, profiting from the UK government’s reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency.

Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound. Soros’s profit on the bet was estimated at over $1 billion. He was dubbed “the man who broke the Bank of England”.

Stanley Druckenmiller, who traded under Soros,  was the genius behind the idea. Soros just pushed him to take a bigger size. In this case, the bigger size was one of the reasons why this trade worked. What is more important here is to highlight their position size. They risked their entire YTD gain (they were up 12%).

Just to give you a perspective of how ballsy it is to risk 12% of your capital on one trade, consider the following simplified example:

Let’s assume that your trading capital is 200k and you want to buy a stock at $50 with a stop at 47; hence you risk $3 per share.

Risking 12% of your capital, means 12% * 200k = 24,000.

Divide 24,000 by the amount you risk per share ($3) to get the total number of shares you could afford to buy, which in this case is 8000 shares. (more…)

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