2022/10/24 (095) Technical Analysis

„Dagger Of The Mind“ And/Or „Much Ado About Nothing“
– Prices Are Rising/Falling Like They Haven`t Been For A long Time, In London.
We Try To Profit From The Historical Volatility With A Long GBPUSD 4XSetUp Too!

The English Patient! Is It Time For Tight Belts?

The failure of the Truss government, which I admittedly did not expect, reveals the weaknesses of British society and or rather the economy: too little growth, too unequal distribution. I never thought in my life that we would find ourselves in such a scenario on the island. Of course, the monetary policy and/or fiscal policy situation is tense! But as? I couldn’t have imagined that – admittedly. The stagflation on the island, including high government debt, and stagnation for my sake, is now also competing with chronically indebted countries like Italy.

The UK’s current financial woes demonstrate what many observers, myself included, fear in the new era of rising interest rates. Going into debt becomes dangerous, and crises of confidence can lead to financial crashes. Which is why I am so extremely proud of my federal government, here in my home country of Germany – which, during the financial crisis of 2008 & 2009, formulated the so-called black zero in the national code. Which, in retrospect, makes us in Germany the cleanest of all dirty shirts, at least in the euro zone, more or less in terms of economic policy. But our current federal government seems to be jeopardizing that credit as well – let’s not do that. And let’s get back to GBP, to the UK. Because we are heading for even leaner times on the island than here on the mainland, in the euro area, also here in my home country Germany.
We are heading for lean times.

The British Financial Crisis Shows What Can Go Wrong On The Way To Tighter Monetary Policy

It’s not just the desolate state of the conservative party that has brought the country to the brink of financial abyss. Just a year ago, Prime Minister Liz Truss (47)’s populist economic policy course would probably have passed without major injuries. However, macroeconomic conditions have now shifted to the point where a government that simultaneously announces large spending programs and tax cuts, further increasing public debt, will be punished by the markets. The finance minister was replaced, an economic policy change of course was announced, and the head of government was forced out of office. So keep an eye out for the scramble to find your successor this week. It is even possible that Brexit Boris Johnson (58) will come back to office. So the importance of these operations extends far beyond the British Isles. After all, Great Britain is not a third-class emerging country, but one of the largest economies in the world, which is home to one of the most important financial centers. As Britain falters, the foundations of financial stability elsewhere shake. So focus on the GBPUSD! Because the USD was above average strong in the current year 2022 and the GBP above average weak – not only in GBPUSD but also against the other key currencies. George Soros said aptly: “The markets are always on the side of exuberance or fear. It’s fear and greed. Right now greed has the better of it, which is rather nice (for investors) as long as it doesn’t get out of hand.” That`s why we take the GBPUSD as a long 4XSetUp trading capability, because I assume that our long DXY 4XSetUp will not hold the 110 points sooner or later more or less. So that hopefully the GBPUSD will also benefit from this…

FTSE 100 Regains Traction Today

In London the FTSE 100 Index rose 46 points or 0.66 percent on Monday.
Leading the gains are Pearson (8.52%), SSE (3.86%) and Barratt Developments (3.73%). Top losers were Prudential (-9.12%), Easyjet (-3.09%) and Fresnillo (-2.73%). Equities in London advanced for a third consecutive session on Monday, with the benchmark FTSE 100 finishing above the 7,000 mark, helped by utilities and consumer discretionary stocks. Investors welcomed headlines that former Chancellor of the Exchequer Rishi Sunak won the Conservative leadership run, making him the next prime minister while easing some concerns about political instability that have rattled markets recently. Still, sentiment remained clouded by worries about the pace of interest rate rises to combat inflation and the effects of tightening monetary policy on economic growth. Pearson and SSE were among the biggest gainers on the index, up 8.5% and 3.9%, respectively. Conversely, Prudential fell more than 9%, the most in the FTSE 100.

UK 10-Year Gilt Yield Falls on Sunak PM Hopes While Moody’s Changes UK’s Rating Outlook To Negative

The yield on Britain’s 10-year gilt dropped 18 bps to below 3.9% on Monday, approaching a 1-month low as investors welcomed the news that former minister Rishi Sunak could become the new prime minister after Boris Johnson quit the contest on Sunday. Meanwhile, rating agency Moody’s downgraded the UK’s sovereign credit rating outlook to negative from stable and affirmed the debt grade at ‘Aa3’. On the data front, flash PMI data pointed to a reduction in UK private sector output for the third month running and private sector firms also indicated a steep fall in business expectations for the year ahead, with optimism the lowest since April 2020.Moody’s Investors Service downgraded on October 21st 2022 the United Kingdom’s sovereign credit rating outlook to negative from stable and affirmed the debt grade at ‘Aa3’, citing as the main reasons behind the decision: 1) heightened unpredictability in policymaking amid a volatile domestic political landscape, which challenges the UK’s ability to manage the shock arising from weaker growth prospects and high inflation; and 2) risks to the UK’s debt affordability from likely higher borrowing and risk of a sustained weakening in policy credibility. The move follows major ratings agency Fitch which cut the outlook for its credit rating on UK government debt earlier this month to “negative” from “stable” in the wake of the mini-budget. Standard & Poor’s credit rating for the United Kingdom stands at AA with negative outlook. Fitch’s credit rating for the United Kingdom was last reported at AA- with negative outlook. DBRS’s credit rating for the UK is AA (high) with outlook under review.

Sterling Remains Weak On Poor Data, Political Uncertainty

The British pound hovered around $1.13 on Monday, as investors monitored the political situation in the UK, while digesting fresh economic data. Still, sterling held close to an all-time low of $1.034 hit on September 26th. On the political front, Rishi Sunak looked set to become Britain’s next prime minister, after former leader Boris Johnson said he wouldn’t enter the contest. Last week, Liz Truss announced she was resigning as British PM following the reversal of her mini-budget, which included £45 billion of unfunded tax cuts and led to days of turmoil on the markets. Meanwhile, weaker-than-expected PMI data showed the UK business activity contracted in October by the most in almost two years, signaling Britain’s economy could be on course for a potentially deep recession amid political and financial turmoil, the surge in natural gas prices, post-COVID supply-chain bottlenecks, and labor shortages.