is buying GBP/USD at this level a good trade?

MiniGrasshopper · Jul 7, 2005

lol its suprizing how many gullable ppl actually believe this fool trades live..when hes been booted of so many forums in past for being full of shit..he definantly is the King of wanabe Demo trading tho..i give him that lol

illiquid · Jul 7, 2005

Ironic many fx traders hold trades for yield differential, when changing yield expectation is main the reason why they are losing money on these trades atm.

Ivanovich · Jul 8, 2005

Changing yield expectation does not constitute reality. If you recall, the USD was hit pretty hard a few weeks back when people expected the Fed to pause because of a preconceived economic slowdown that wasn't a slowdown at all.

Sometimes, if you believe the market is running on "herd" mentality and being irrational, you can take a bet against it. It's a bet, but when everyone is running a particular way, be afraid. Be very afraid.

sKaLpZ · Jul 8, 2005

It's all herd mentality!

Lon Eagle · Jul 8, 2005

Quote from Ivanovich:

Changing yield expectation does not constitute reality.

I don't agree with this I am afraid.

It is pretty well known that the MPC in the UK tend to guide their actions by their quarterly inflation report. Unless there is something very signicant happening they only change rates in the month this report is published. The whole purpose of this report is to try and predict the path of inflation over the next 2-3 years/. One of the key components of this is the sterling interest rate futures contract - they have explicitly stated that this is the basis of the report. Hence yield expectations are actually incorporated in their report.

illiquid · Jul 8, 2005

Quote from Ivanovich:

Changing yield expectation does not constitute reality. If you recall, the USD was hit pretty hard a few weeks back when people expected the Fed to pause because of a preconceived economic slowdown that wasn't a slowdown at all.

I've always subscribed to the idea of perception = reality in the markets; even if what is expected does not come to pass, markets do move on expectations as you mention above, and profits/losses from those moves are real enough. In any case, by the time expectation and reality do converge, the opportunity for profit has long since passed.

Ivanovich · Jul 8, 2005

Quote from Lon Eagle:

I don't agree with this I am afraid.

It is pretty well known that the MPC in the UK tend to guide their actions by their quarterly inflation report. Unless there is something very signicant happening they only change rates in the month this report is published. The whole purpose of this report is to try and predict the path of inflation over the next 2-3 years/. One of the key components of this is the sterling interest rate futures contract - they have explicitly stated that this is the basis of the report. Hence yield expectations are actually incorporated in their report.

I was speaking in general about expectations and actuality in the market. Fact is, it's beginning to look as if almost everyone is short GBP. And when that happens, it's time to examine what is around the corner.

illiquid · Jul 8, 2005

That's funny, I was just about to say that it seems like the herd mentality is trying to pick a bottom in gbp, which is why it seems to be falling so steadily. I think the hugely negative sentiment on the euro last month drove alot of players into shorting eur and going long sterling, and this recent action is an unwinding of that -- eur is the one which feels "short-heavy" to me.

sKaLpZ · Jul 8, 2005

Quote from Ivanovich:

I was speaking in general about expectations and actuality in the market. Fact is, it's beginning to look as if almost everyone is short GBP. And when that happens, it's time to examine what is around the corner.

You are right about that because, while individual trading is extremely risky, the "herd" always gets wiped.

Ivanovich · Jul 9, 2005

Quote from illiquid:

That's funny, I was just about to say that it seems like the herd mentality is trying to pick a bottom in gbp, which is why it seems to be falling so steadily. I think the hugely negative sentiment on the euro last month drove alot of players into shorting eur and going long sterling, and this recent action is an unwinding of that -- eur is the one which feels "short-heavy" to me.

See, and I think the hugely negative sentiment drove people into going long USD (which is why all majors lost against the USD). Regardless, if you call a near 1000-pip drop in 7 days "steady", I would hate to see what you think is not steady.