1 Minute Market Rundown – 26th September 2022
Sterling in Freefall
Conservative Budget Risks Inflation Spiral
Russian Action Raises Global Tensions
The pound fell on Friday in spectacular fashion before imploding overnight in Asian trading. Lows around 1.0330 mean close to a 10 cent fall since the UK government’s “mini” budget on Friday morning. In 30 years of trading it is hard for me to comprehend the proud pound trading like an alt coin being tweeted about by a car maker!
The facts are that the huge gamble by the conservative leaders is being ridiculed by analysts, traders and central bankers around the world. Cutting taxes and loading up on debt during spiralling inflation and rising interest rates is just as imprudent as it is irresponsible. The ethos is fine, give people more of their money to stimulate the economy, but giving the highest earners more money who aren’t struggling just risks either spiralling the inflation rate or causing 10 percent levels to embed in the economy.
The pound has nowhere to go and no sign of a saviour. The Bank of England is being backed into a corner and demand for inter meeting hikes with a yield curve now pricing in 5.5% rates next year. The old lady has a long memory, and raising rates to prop up the pound has been tried before (15%) and it didn’t work. I suspect they will be slow to react and time is something the pound does not have on its side. We will sell anywhere near 1.0850/1.0900 and whilst I can scarcely believe I am writing this – a test of parity beckons.
Elsewhere the UK woes coupled with a significant deterioration in rhetoric around Russian nuclear threats have kept risk markets, assets and currencies on the back foot. As we enter quarter end there is a chance of some equity rebalancing which could lend support but that is far from a buy recommendation.
The embers of a crypto rally on Friday never stood a chance to ignite considering other events. That said, the majors are holding up well and continue to lead me to the conclusion that we are in long term value territory and dips are to be bought. Long ETH/GBP looks considerably good value when you take a step back…
As always, good luck out there!
Richard Usher – Head of OTC Trading
BCB Group comprises BCB Prime Services Ltd (UK), BCB Payments Ltd (UK), BCB Digital Ltd (UK) and BCB Prime Services (Switzerland) LLC. BCB Payments Ltd is regulated by the Financial Conduct Authority, no. 807377, under the Payment Services Regulations 2017 as an Authorised Payment Institution. BCB Prime Services (Switzerland) LLC, a company incorporated under the laws of the Swiss Confederation in the canton of Neuchâtel with business identification number CHE-415.135.958, is an SRO member of VQF, an officially recognized self-regulatory organization (SRO) according to the Swiss Anti-Money Laundering Act. This update: 14 Oct 2020.
The information contained in this document should not be relied upon by investors or any other persons to make financial decisions. It is gathered from various sources and should not be construed as guidance. The information contained herein is for informational purposes only and should not be construed as an offer, solicitation of an offer, or an inducement to buy or sell digital assets or any equivalents or any security or investment product of any kind either generally or in any jurisdiction where the offer or sale is not permitted. The views expressed in this document about the markets, market participants and/or digital assets accurately reflect the views of BCB Group. While opinions stated are honestly held, they are not guarantees, should not be relied on and are subject to change. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This document may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Past performance of the digital asset markets or markets in their derivative instruments is not a viable indication of future performance with actual results possibly differing materially from those stated herein. We will not be responsible for any losses incurred by a client as a result of decisions made based on any information provided.