Will sterling take a beating this week ?

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It's not as simple as that!

Current US inflation rate is running at 3.6%

Current UK inflation rate is running at 2.4%

Thus real return on the currencies are 4.75 - 3.6 = 1.15% ($)

and 4.5 - 2.4 = 2.1% (£)

Reply to
Mel Rowing

On 27 Mar 2006 01:37:16 -0800, "Mel Rowing" mysteriously appeared thru the usenet mist to inform us thus...

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How does domestic US or UK inflation affect foreign speculators?

Reply to
hummingbird

But both of those numbers are fantasies.

But the real rate of inflation in both countries is probably more like

8%.

Mark

Reply to
mmaker

Well if you believe that sell borrowed pounds for dollars and make (or lose) a lot of money.

Reply to
Mel Rowing

Professional currency speculators are doing that sort of thing all the time although from what I've seen the euro and the yen seem to be the currencies presently tipped to emerge stronger over time by many dealers.

Huge trade and budget deficits in the US and UK suggest that both currencies may come under increasing pressure as global liquidity is increasingly tightened so I wouldn't be rushing to exchange sterling for dollars just yet.

Reply to
Crowley

Abelard reckons 10% in the UK and for once I have no reason to disbelieve him ;-)

Reply to
Crowley

On 27 Mar 2006 04:30:12 -0800, "Crowley" mysteriously appeared thru the usenet mist to inform us thus...

But abelard claims *inflation* = M4-GDP - ie monetary inflation

- but there's no consensus that this always feeds through to CPI even after a lag and it's CPI that most people mean when referring to inflation.

OTOH I do agree that true CPI is higher than government claims, I'd put it at about 6-7% in the UK but it varies for each household; elderly people probably suffer higher than a couple in their 30s with good jobs.

Reply to
hummingbird

I knew there'd be flaws in old fraudy's methodology.

Reply to
Crowley

Lets see...currently its 1.7486 according to Yahoo, check back in a week, that might give us an indication of how good these economic gurus are....or as they say, if you lined all the economists in the world up end-to-end, they still wouldnt reach a conclusion.

Reply to
Tumbleweed

Ah now you come to the nitty gritty!

The above calculations of course alter somewhat if the CPI gap between the two countries changes. The only thing we can almost be totally certain about with respect to this is that it will change. I supose it's possible to shrewdly guess the direction of any such change (a toss of a coin will give you a 50% chance of doing such) but the magnitude of any such change is a different matter.

If I could accurately predict these matters over say the next 3 months then I wouldn't be wasting money making time talking to you.

Me neither! To begin with I wouldn't have the nerve to involve myself in such markets I certainly don't have the funds to make any such adventure worth while. I prefer to dabble in the equity markets myself. Methinks this is a market strictly for the professionals handling other people's money.

Reply to
Mel Rowing

Exactly. Currency speculation is a very easy way to lose your shirt.

Reply to
Crowley

I think that over time both the dollar and sterling are going down against certain other currencies particularly the yen, euro, and remnimbi. Global imbalances have to be worked through.

Reply to
Crowley

Long term rates in the US are already higher than in the UK.

Reply to
Jonathan Bryce

Did you write for Nostradamus in your spare time?

Why not go the whole hog? "something that might be a currency, but might alternatively be a bridge or a type of small european frog, may but then again may not, change value against something else that might or might not be a currency, or perhaps a type of horse or a statue or a verb, at some point in the past or future."

As it is, your headline says 'this week' so thats all I'm giving you, and the text is dollar/sterling, so you are stuck with those as well :-)

Reply to
Tumbleweed

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Well the Fed has just upped their rates to 4.75% and sterling hasn't crashed through the floor yet so I guess it's safe to say don't believe everything you read in the Times ;-)

Reply to
Crowley

It hasn't really moved at all, which means that the market had expected the rise, and had already factored it into the rate.

Reply to
Jonathan Bryce

Spot on. It's where we go from here that's the interesting bit.

Reply to
Crowley

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A £ is only worth what it will buy.

Reply to
matthew.robb1

It's not a methodological flaw, it's that he's measuring something different. Inflation is not the same as CPI.

Reply to
matthew.robb1

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