Pound Pounded as BOE Action Portends Easing and UK PMI Comes in Weak

The British pound has been hammered to fresh lows just above $1.3115.  The euro is moving toward GBP0.8500.  The immediate catalyst is three-fold.  First, one of the UK's largest property funds has moved to prevent retail liquidation. Second, the BOE reversed an earlier decision on the capital buffer for banks, which is tantamount to easing policy by boosting the banks' lending capability by as much as GBP150 bln.  Third, UK services PMI was weaker than expected.

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Are We at Peak Pound Yet?

Sterling is recording its daily advance since 2008 today.  It is up about 2.3%.  The ostensible driver is the weekend polls suggesting that, as we suspected the murder of the UK MP acting as a catalyst of sorts for public opinion.  The odds makers in the betting houses and the events markets have also shown a shift toward remaining in the EU.

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Markets Undergo a Mild Psychology Shift

Since the murder of UK MP Cox last week, the mood in the markets shifted.  Today is the continuation what was seen in the last two sessions last week.  The difference is that participants seem more confident, as the polls and betting odds seem to support our initial recognition of the tragedy's potential to impact psychology. 

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CFTC: Setting Up for the Vote

In the days ahead of the murder of Jo Cox, a UK member of parliament, apparently for her support for remaining in the EU, speculators in the futures market scooped up sterling.  They added 25.4k sterling contracts to lift the gross long position to 61.7k contracts.  This is the second largest long speculative position after the mid-March holdings of 62.9k long contracts.

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Technically Speaking: Could We See a Shaky Dollar?

The US dollar recovered from the sell-off sparked by the poor employment data released on June 3. It continued to move higher after the Federal Reserve met and shaved its forecasts for the next year and 2018.  The number of Fed officials that think only one hike may be appropriate this year increased from one in March to six in June.

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U.S. Treasury Department Lays Down the Currency Law

For over a quarter-century now, the US Treasury Department has released a formulaic report on the currency policy and practices of key economies on a semi-annual basis. On occasion, it has hauled up a trading partner as a ‘currency manipulator’ and proceeded to jawbone that partner to appreciate its currency and shrink its bilateral trade surplus. This was the case with South Korea and Taiwan in 1988 and then again in 1992 with China and Taiwan.

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Is Gold Back?

It wasn't so long ago that some of the more famous investor gurus were shrugging off gold as nothing more than shiny trinkets with no investment value. They were wrong. This safe haven is back, the recovery is clear, and there have been some very big changes of heart.

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Intervention or Valuation Change?

News that Switzerland's reserves rose to a new record high of CHF602.1 bln in May from CHF587.9 bln in April spurred talk that the SNB has been intervening covertly.  One media account cited one trader that terms the intervention as "massive."

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Options Market Stressing over a Brexit

Many market participants began talking as if it were nearly a done deal that the UK will vote to stay in the EU.  It is as if Winston Churchill's witticism that Americans can be counted on to do the right thing after they have exhausted the alternatives really applied to the UK.

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Finding the True Measure of Gold

Many investors still think about gold as if it were money.  Economists identify three functions of money: store of value, means of exchange, and a unit of account.  It can be a store of value, but the price fluctuates compared with other forms of money, or other commodities, like oil or silver.

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