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GBP Trade Index 18-Year Chart

by Ashraf Laidi
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Sterling's trade-weighted index hit a 12-year low in November 2008 when measured against a basket of currencies. The index incorporates various bilateral exchange rates, reflecting changes in the price competitiveness of traded goods and services and trade flows in manufactured goods and services. Country weights are updated annually and are determined by the average share of UK imports/exports over the latest three year period as long as it exceeds 1%. The base 100 value is set from January 2005. Weights were last determined in September 2008.

The basket currently comprises 46 countries, with the main components as follows; USA at 16.1%; Germany at 12.5%; France at 9.4%; The Netherlands at 6.6%; China 5.9%; Belgium and Luxembourg at 5.9%; Italy at 4.7%; Japan at 4.3% and Switzerland at 2.9%.



 

Comments By Users

Ashraf Laidi New York, United States
2008.11.23
Simon, EURGBP is more likely to hit parity than GBPUSD. As for the arguments you site about the elite deluding themselves, the same thing can be said about the US. I repeatedly mentioned last autumn that the GBP will be the USD of 2008 (ie will do as badly in 2008 as did USD in 2007).
Ashraf Laidi New York, United States
2008.11.23
We're clearly entering a period where fundamentals are taking a backseat to the forces of risk appetite, which became highly obvious for bank dealers to make money. In fact, Sept and Oct have beeen the best months for FX trading desks this year. As for the 200-pip rebounds in GBPUSD and other currencies, one cannot expect currencies to go in a single direction without retracement. Otherwise, there will be no market.
Ashraf
Brendan Raffles Place, Singapore
2008.11.22
After trading for couple of years, I really wonder if fundamental is that important to a forex trader.

Most forex trader only tried to capture 30 - 200 pips profit. Fundamental of cable can be very weak, yet the trader can still lose money if he pick the wrong entry point.

I have developed a system for myself in trading GBPUSD, this is my lastest trade on cable: http://www.forexandbinary.com/2008/11/took-profit-on-gbpusd-104-pips-profit.html.

Anyone who is interested can send an email to me at metal.commodity@gmail.com.
Simon Harrogate, United Kingdom
2008.11.20
Ashraf,

I base my parity hypothesis on looking at a 30yr. chart and seeing that it went to $1.05, c.1985. The UK is even more of a basket case than America. At least there is a chance you guys might bounce back. The UK economy has so many structural problems it could collapse into a severe depression. We may need the IMF to bail us out, as happened in the '70s.

I agree the Great Unwind is causing USD strength and this will probably continue for a while.

Some say the Euro is the better place to hide if you have GBP. If the chart breaks c.1.16 it has no support, I've heard 80 cents is possible.

Sitting here in the UK it is all very bleak. The elite have deluded themselves that this is going to be a V shaped recession and the economy will start bouncing back in late '09. I feel like I'm surrounded by lunatics.

Onwards and upwards.

Ashraf Laidi New York, United States
2008.11.19
Well put Simon ! Also add foreign capital flows, which have habitually fed in the UK's soaring current account deficits (in addition to the budget deficits). The main reason I don't foresee parity in cable is the existing imbalances in the US dollar, and the continued faltering in US fundamentals. We all agree by now that the dollar's rally has primarily rested on forced liquidation and short-covering rather than reflection of true fundamentals.

Ashraf
Simon Harrogate, United Kingdom
2008.11.19
I think GBP is probably heading to parity with USD. Our economy has been built on three pillars:

~Financialisaton.
~Property Speculation.
~The State.

Financialisation is bust. Property Speculation is crashing. The State is skint.

GDP is expected to contract -1% to -2% in 2009. I expect it to be worse than this, as our economy is based on Service and Consumption. This will now contract viciously as the multiplier goes into reverse due to huge debts and little free cash flow.

I hope GBP dead cat bounces as I'll be shorting more.

Good fortune.
Ashraf Laidi New York, United States
2008.11.19
Francis, all you need is negative UK data and renewed selling in equities or both, or a serious case of the latter. I still need to see a rebound (maybe a fake one) towards $1.60 before mulling its fate. But yes, lately, it seems that it wants to rally regardless of bad stocks. The $1.51 trend line resistance is you rmajor barrier. until then, plenty of swings between 1.47 and 1.51.
Ashraf
francis GuangZhou, China
2008.11.18
Ashraf

(BOE) like Also has Rate cut chance In DecemberFundamental plane Looking at

Does not favor GBP/USD, But look at Technical shape As if not bad.

1.5090 if can be On broken looking at 1.5275, what do you think Market anticipated

and which rate is safe side? 1.4800 or 1.4870
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