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Jan 25

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Now what for the Eton Duo and The King ?

No great technicals to trade this morning. Some great pure gambles and trading on tips if you like that sort of thing.

After the UK GDP data crashed the forex market at 09:30, any meaningful trade ideas have been dashed for the day. When someone does a Bomb in the swimming pool it takes a while for the ripples to dissipate, while the aftershocks / aftersharks are having fun. I’d be surprised if there are any trades that meet my profile today.

The big question is what will Osbourne and Cameron do now ? A slowing economy and Inflation on the rise, something only like a basketcase nation like Argentina (I have lived there, it is a basketcase, nice meat but a basketcase nonetheless) has had to face or the bad decades in the UK of the 30’s and 70’s.  The troubling dichotomy that the UK Govt has is that this time around inflation is being stoked by externally, global forces, mainly by commodities and not by a domestic spending bubble. Any UK government wants to see a thriving economy in order to retain power, that’s the only game-plan of any honest politician (the power not the economy by the way), but since 1997 the UK Govt abdicated interest rate decisions to the BOE, which leaves the key to the success of this coalition not at 10 Downing St but at Threadneedle St.

Which leaves the BOE between a rock and a hard place.Raise interest in the next QTR will now look foolhardy given the latest GDP data, but the UK needs a much stronger currency in order to mitigate the inflationary pressures of USD priced commodities. My view is that UK rates could easily go to 2-2.5% without hurting the economy, they will still be well below average and if they raise rates now in-front of the fed Sterling gets a much on the USD and helps to bring our commodity prices down. The long term plan is to have our rates at a premium to The Fed, now that is a sobering thought !

Either way The Lady of The City has the last laugh.

Jimmy

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