Nicole Elliott, Private Investor and Technical Analyst, discusses UK politics and presents view on trade weighted sterling exchange rate, GBP/JPY cross, GBP/KRW and importance of interest rate differentials in determining the exchange rate.
Key quotes
Monthly chart of BOE’s sterling trade weighted index – Has breached trend line support in July. The 12% drop on June 24th brings it in line with EM currencies and commodity dollars. The so called sharp fall merely put us back to where we were in 2009-10
GBP/JPY – Massive bullish engulfing candle on the weekly chart
GBP/KRW – Downtrend had begun in 2015 i.e. way below Brexit talk began. The drop contradicts interest differential theory, which remains in favor of sterling strength.
Sometimes interest rates matter, sometimes they don’t