Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook
We wrote last winter that at some point, hysteria and selling panic have to stop not because of fundamentals, but because people become exhausted. It's tiring to be truly fearful. It literally wears out the adrenal glands (the source of flight-or-fight juice). A 20% drop in the Shanghai may be just what the doctor ordered as long as it stops somewhere around there... having said that, we doubt the Chinese government is going to intervene in any signficant way. It is newly committed to free markets (one decade) and doesn't want to appear to be rigging them too much. These are very smart people with their eye firmly on the long-term horizon.
The market will just have to sort itself out.
The best of all possible worlds would be if Chinese credit is indeed tightened and the stock market decides it can live with that. Then global stock markets will rally like crazy, and so will the Australian Dollar exchange rate. The US dollar rate will sink back as the need for a safe-haven fades and relatively riskier currencies, including the euro exchange rate which yield a tad more - go back into favor. We imagine this is still the big-picture and the events in the Chinese stock market are just a bump in the road.
We can't find a reason to buy dollars other than safe-haven reasons, especially with the political picture in the US so nasty… even FIFO doesn’t work anymore, with Europe actually ahead of the US in the growth sweepstakes, a rare occurrence.
The problem is that we can't name the exact timeframe in which risk appetite comes back. We have to watch the Shanghai and commodity prices, especially oil. Instead of nice smooth swings, we could continue to get jumpy moves that are up one day and down the next. For tend-following traders, this is a recipe for big losses, so extreme caution is called for.
Pounds to US Dollars = 1.6496
Pounds to Euros = 1.1586
Euro to Pounds = 0.8628
Pounds to Australian Dollars = 1.9848
Bye For Now
Barbara Rockefeller
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1 comment:
I believe this is all due to ongoing economic crisis. But I am certain this all will come to normal as this economic crisis will stabilize. As per experts worst of this present ongoing crisis is over, so we can expect the situation to be normal soon.
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