EUR/GBP (GBP/EUR)

I cannot see any real relief for sterling until after the election structurally. However anysign that the economy is no longer falling will take off the downward pressure. Conservative Party Conference in which they will be on parade and hopefully having something to say on Wealth Creation and biglow tax bands the latter I bombard them with as the potential winning strategy might give a prospect of light on the horizon together with cuts in thepublic sector. I don't do forex but hang in euro high div shares at present including Santandar to collect euro cash.

I've attached a chart for this - not sure what you guys will make of it: good or bad. http://img25.imageshack.us/img25/4632/eurgbp25thsept09.jpg

0.927!

My view on currency at present is that euro strength will make it more difficult to sell outside thezone . raw materials and oil are more expnsive but releved by cheaper $.On balance it is negative and think the euro cannot continue to rise but the correction required is a hardening of the $ when QE ends.Sterling then could weaken against $ because of their stronger economy but potentially less than the euro.I see sentment to sterling still weak in coming weeks but next year external factors may move to its advantage so we will probably see stabilisation. I will be watching the UKbalance of payments quite a lot to seeif apart from weakness in imports and less money flowing out in travel and property investment -there is much development yet in export volume.

Pat, Good thoughts as usual. I am very interested in the subjects of QE, BOP, imports to UK, cash out of UK in tourism and foreign property investment. I'd be pleased to hear your response to the interest rate thread that I started in this section.

did a long here from 10723 - great stuff thanks in part to TIE

that's GBP/EUR to clarify

I'm sooooooooooooooo tempted to close and wait for the slight pullback, and go long again. almost 200 pips and i don't want to erode any of it! choices, choices

TIE - seriously, do you practice "the dark arts", as you say within days of you saying so, this turned. Spooky or what. But here's a warning:remember Dr Faustus!!! Lol

After a strong rally over the last month or two, EUR/GBP is retracing hard - nearing 0.89 now.

Euro getting whipped - EUR/GBP @ 0.884.

GBP/EUR seems to have been range bound for that past four weeks, is there any significance to this ? Any advice would be great, thanks.

Anyone ?

Hi NeilJ, I would say that, broadly speaking, EUR/GBP has been stuck around 0.89 for a lot longer than that. Many months in fact. Most people would accept that the GBP will eventually gain strength but that depends upon the factors which have been discussed before, i.e clear signals that the UK is emerging from the recession followed by a reduction of quantitative easing from the market and raised interest rates. The exchange rate pair will react to things like the general election and plans for reduction of the budget deficit, reduction of public shareholdings in the banks.

A to your Q! The significance is that there has been no unexpected news for a while, the pair have stagnated and everyone is waiting to see what develops.

Thank you Monaco. I'm still a novice at these things but it looks like a good trading range has developed ?

NeilJ, 8 times out of 10 you will do fine with such a range but if you don't recognise and plan for a potential break-out you could be hung out to dry. There could easily be excursions from the range towards 0.85 or 0.99.

Ye, been reading Malcolm Pryors Spread Betting Strategy book and was looking at stop placements to limit damage on such occurances. Have you been trasing the current range at all, if its okay to ask ?

Sorry, that should read 'trading the current range...'.

Neil, I lost interest in trading this a while ago but still kind of keep an eye on it. I am exposed to it somewhat in my 'real life'. I note that news today points towards a modest GBP rally. SocGen reluctantly acknowledge some chunky write-downs. German economic output down 5% over 2009. BoE's Andrew Sentance hints that interest rate rise to come soon. This is all very predictable stuff. The French banks have been (abetted by the Fr Govt) very slow to admit exposures, Germany has remained the key hope of the Euro-zone but their export and home markets are weak and FX rates mean their prices translate badly. It should come as no surprise that interest rates will return. Of course, less confidence in Euro spells Dollar rally.

Thanks again Monaco. Any ideas on where the modest GBP raly might go to ? Do you use charts to plot these things ? Sorry for all the questions, just trying to get as much info as possible.

Neil, I only have rudimentary skills for using charts but I have a reasonable feel and a good memory so I maintain some perspective and don't just get caught up in the moment. That said, fairly recent conditioning has led me to close my EUR/GBP shorts when they get to 0.885. I believe that in the next few months it will go much lower than that but, as you said, the pair is range-bound so I would be looking for confirmation that things had changed - lower lows and lower highs in the oscillations - before targetting lower limits. For example, I would not be surprised at all to see 0.8 (i.e. €1.25/£1) but I won't be tying up margin for the long play when I can just nibble on the swing until I get that confirmation.

Thanks for the replys Monaco, much appreciated.

Part of me is tempted to go long from 0.888 since it is very unlikely that we won't see 0.89 or 0.90 again very soon but I would feel uncomfortable betting against my longer term forecast, which is for GBP strength and EUR weakness.

Looks like you were right Monaco. Did you take that long positionat 0.888 ?

A number of factors have worked in sterlings favour recently. Sentiment towards euro affected by the Greek debt position-and there is uncertainty as to how it will work out and it could be long drawn out.Also it is not yet known how many other of the PIGS will actually be affected in a similar way. The ECB will do more than paper over cracks but others like the Germans will demand more from these countries in pain as they hae to pick up the bill and just how much will the populations of these countries accept? Some UK domestic indices are looking better admittedly on the back of QE by the BOE and although it is questionable how long we can go on like this as long as we are and we appear to be no worse than other countries it is working in sterlings favour. Then there is the uncertainty in America some of the matters very temporary political ones but longer term political and economic issues that raise whether Obama may become a lame duck President. If he does would not surprise me if he resigns and says he has better things to do with his life !But this has strengthened the $ because weaker domestic demand means less imports and the prospect of more conservative economic policies generally there make the euro less attractive.When the $ is stronger against the euro sterling usually moves about 50% of the move on its back. Fundamentally with Big Mac comparisons sterling almost down to parity a year ago can still afford 1.20-1.25.What is the outlook -very complex and short term predictions only safe like with the Met office. Continuing favourable UK figures might cause hung parliament or Labour small win -a Labour small win at least would be more positive initially for sterling than a hung parliament which would cause a rout but would cause more trouble down the line if they do not deal with the problem of our lack of production and marginal taxes on incomes.A Cameron win would be more positive for sterling initially but the fact remains in question whether they would be able to generate the private sector growth of the right kind ie geared to exporting in particular with a higher £ and whether slackening domestic demand would be insupportative of business revenues that would be needed to finance such growth if restrictive domestic policies are persued.So I see limited upside for sterling against euro unless there is real difficulty in those weaker economies. As I live here and using it here and using euro for travel I will keep sterling rather than euro but will try to add to the quantity of my sterling by getting euro on the dips and getting rid of it again whilst changing notes for euro on good days for travel. A for places in the sun maybe keeping euro from cheap rates is a good idea as you will be sure of getting it come what may -in a German or French account or in good dividend paying european equities. This is not advice just thoughts ! P

Sterling temporarily sheltered because of the Greek impact on the euro. Some say euro is doomed but that would need a political upheaval - so many French Germans Dutch even Italians would love their old currencies back -maybe the Spanish might get their peseta back. Nice for the holidays if we then had a good UK Govt looking after our £.$ seems to be the favourite at the moment Aussie dollar better to keep for yield.Euro could bounce back temporarily against sterling nearer election if an indecisive outcome looks likely.