GBP Disturbing Correlation
Most traders are aware of the positive correlation between equity indices and high yielding currencies such as the AUD and NZD. But something else has come up as of late. GBPUSD has grown positively correlated with equities, especially US indices (DOW30 and SP500). I have already mentioned this in several tweets earlier this month, asking followers why GBPUSD outperforms EURUSD and USDJPY during rallying stocks and why it is among the big losers during risk-off. Said differently, EURGBP tends to rally as stocks decline and vice versa.
Why has GBP become a risk-on trade? The UK's swelling current account deficit of 5.7% of GDP and the structural downside risks of Brexit imply it will be more challenging for the UK to draw necessary funds to finance the deficit, especially at a time when the currency has fallen to the mercy of soundbites by bankers mulling departing London, politicians discussing Hard Exit. In otherwords, GBP only draws buying when speculators are in the mood for risk, hece, risk-on flows. For a detailed view on the UK's current account situation, see my Bloomberg interview.
توازن بين الخروج السريع والبقاء الصبور
by Ashraf Laidi | Mar 22, 2019 14:23
Yen up as Yields Break Down
by Adam Button | Mar 22, 2019 11:48
تعلم من صفقاتك الناجحة والخاطئة
by Ashraf Laidi | Mar 22, 2019 10:00
Fed Confirms No Hikes
by Adam Button | Mar 21, 2019 10:18
إستغلال الفشل المناسب في مؤشر الداكس
by Ashraf Laidi | Mar 20, 2019 16:24