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Don’t miss our next trade idea. Get on the Bear Traps Report Today, click hereA 6% drop in GBP/USD that caught investors and market makers by surprise has been partly attributed to algos failing after traders targeted downside option barriers, say three Asia-based FX dealers, Bloomberg reported.
The drop accelerated as liquidity disappeared, and dealers failed to load bids into their trading platforms. One trader says his FX pricing aggregator of eight contributors blacked out for 30 seconds amid an absence of bids.
The economic paradigm in the UK continues to be thesis confirming. Survey data is moving up from a low base as market performance has trickled into the real economy. Producers now feel this may not be the catastrophe it was promised to be. The problem is, the Pound is pricing in that domestic mess as the UK is basically bank, with a 5x banking system to GDP and M4 that is parabolic.
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Don’t miss our next trade idea. Get on the Bear Traps Report Today, click hereWhile countries have been fighting to move their currency lower, the UK actually net loses from a weaker pound. They run a current account deficit of around -6% of GDP, the biggest in the g10. The production supply chain is largely imported thus, input costs are getting out of control, which is being shown in 5y5y inflation expectations at 3.4%. In theory, the UK is the best g7 Econ in terms of GDP and inflation, yet they have the lowest real rates. The BOE could go again in Nov but Dr. Forbes of the mpc is getting a bit more traction. I am now beginning to think that without any control of the Pound, the UK is heading for stagflation as survey data will reverse lower as this unknowable economic headwind, known as Brexit begins to clarify itself.
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