Search
Search titles only
By:
Search titles only
By:
Home
Forums
New posts
Search forums
What's new
New posts
New profile posts
Latest activity
Members
Current visitors
New profile posts
Search profile posts
Log in
Register
Search
Search titles only
By:
Search titles only
By:
New posts
Search forums
Menu
Install the app
Install
Reply to Thread
Guest, we'd love to know what you think about the forum! Take the
Diabetes Forum Survey 2024 »
Home
Forums
Off-Topic
General Chat
May & Leadsom...Who Will Be Our Next PM?
JavaScript is disabled. For a better experience, please enable JavaScript in your browser before proceeding.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an
alternative browser
.
Message
<blockquote data-quote="britishpub" data-source="post: 1198436" data-attributes="member: 175573"><p>It's rather worrying that her main claim to credibility is that she worked in "Investment Banking" yet she clearly has no idea how the markets work.</p><p></p><p>It is easy media nonsense to think that the value of a currency has anything whatsoever to do with the base rate in any particular country.</p><p></p><p>The market does not work that way, the investors who trade in currency to not do so based on what interest rate they can get at their local Building Society.</p><p></p><p>If the Interest Rate in a particular country is set at a level that is inconsisitent with that countries economy, the cuurency will come under pressure and will likely fall in relative value. (FX rates are relative value not absolute value).</p><p></p><p>If the BOE cut interest rates, and the market believes that the general state of the economy does not warrant lower rates, the currency will fall. If however the market believes that lower rates will benefit the economy the currency will rise.</p><p></p><p>The events of 1992 should show how this works.</p><p></p><p>The BOE were forced to raise rates in response to Germany raising rates due to the huge costs of German reunification. At the time our economy was quite fragile, and the UK (along with most of the rest of Europe) were on the brink of recession. The market spotted this anomoly (George Soros in particular) and began to sell GBP (as well as the ITL and FFR and other currencies in the ERM) and the end result was the crisis in September 1992 (Black Wednesday) when despite the BOE raising rates repeatedly, GBP kept falling and we were forced to leave the ERM and float GBP which fell a long way.</p><p></p><p>Higher rates do not automatically mean a strnger currency, as lower rates do not automatically mean a weaker currency.</p><p></p><p>Investment Banking 101.</p><p></p><p>P.S. I was a FX trader for 16 years in the City, working for a a couple of large US Banks, and was working on 16th September 1992.</p></blockquote><p></p>
[QUOTE="britishpub, post: 1198436, member: 175573"] It's rather worrying that her main claim to credibility is that she worked in "Investment Banking" yet she clearly has no idea how the markets work. It is easy media nonsense to think that the value of a currency has anything whatsoever to do with the base rate in any particular country. The market does not work that way, the investors who trade in currency to not do so based on what interest rate they can get at their local Building Society. If the Interest Rate in a particular country is set at a level that is inconsisitent with that countries economy, the cuurency will come under pressure and will likely fall in relative value. (FX rates are relative value not absolute value). If the BOE cut interest rates, and the market believes that the general state of the economy does not warrant lower rates, the currency will fall. If however the market believes that lower rates will benefit the economy the currency will rise. The events of 1992 should show how this works. The BOE were forced to raise rates in response to Germany raising rates due to the huge costs of German reunification. At the time our economy was quite fragile, and the UK (along with most of the rest of Europe) were on the brink of recession. The market spotted this anomoly (George Soros in particular) and began to sell GBP (as well as the ITL and FFR and other currencies in the ERM) and the end result was the crisis in September 1992 (Black Wednesday) when despite the BOE raising rates repeatedly, GBP kept falling and we were forced to leave the ERM and float GBP which fell a long way. Higher rates do not automatically mean a strnger currency, as lower rates do not automatically mean a weaker currency. Investment Banking 101. P.S. I was a FX trader for 16 years in the City, working for a a couple of large US Banks, and was working on 16th September 1992. [/QUOTE]
Verification
Post Reply
Home
Forums
Off-Topic
General Chat
May & Leadsom...Who Will Be Our Next PM?
Top
Bottom
Find support, ask questions and share your experiences. Ad free.
Join the community »
This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies.
Accept
Learn More.…