Ben W Bell

Well the BoE has decided to freeze interest rates again this month, against all expectations. I suspect it may have something to do with the slumping US dollar.

cneldred

that was the minutes of the Bank of England meeting held 2 weeks ago, however the inflation data that came out yesterday means the markets are now certain that we will have a rate hike next month. with another possible later in the summer.

re the CAD$ 2.70 comment and your trader friend sending you an email saying it traded there briefly early this year. Believe me it didn't happen. I have been a trader on the financial markets for 13 years, for numerous banks and hedge funds, i have checked all charts and it wasn't there. The high from last 12-15 months is circa 2.36 ish.

If need be i can send you links to check it yourself.

Iain Mc

I'm actually (given most Canadian banks, mine included, let you hold US dollar accounts) looking at the US rate at present, and wondering whether or not it might be better to hedge some pounds using what is a twenty-year £ to US$ high, and presume the US dollar will strengthen against the loonie at some point in the future.

$2.01!

Cheers, Iain

rae

given your expertise, perhaps you could help as after reading this i'm a little confused. my basic and very limited economic knowlegde led me to believe a nose diving US economy coupled with a rise in intrest rates here would make the pound a better bet against the canadian $, should we be hoping for intrest rate stability in the UK instead?

cneldred

indeed you are very correct. That is why pound is so strong against the US$. The CAD$ is not playing the game at the moment, however once the US start cutting rates i suspect the Bank of Canada may follow. Bear in mind that would also give the housing market there another boost.

rae

ta, don't like the sound of the housing market in Alberta getting any stronger in the next 6-8 weeks though.
do you think in this timescale there is likely to be a dramatic effect in the rate, or is it likely to be more subtle given what you have said, even if the uk rate jumps a 1/2% as seems widely predicted?

steve666

In which direction are we talking about now?? Strong pound or strong Can dollar?

The TWs

I believe you - I just wanted to believe it *could* get that high... <sigh>

cneldred

with a 6-8 week outlook, i don't think we will have any wild flucuations. And the US Fed won't cut in my opinion until the end of the year therefore housing market will stay on track.

Danny B

So should I wait until the 2nd UK interest rate rise in the summer or change everything as soon as my house is sold?

To be honest, if I get $2.30 I'd be very happy, any extra is a bonus

MarkG

The US government can't cut rates without destroying the dollar... it's in deep poo as it is. The only way I can see them getting away with cuts is if there's a global recession and everyone is doing it.

Similarly, I suspect that Canadian rates will be substantially higher by the end of next year. Inflation is rising everywhere, even in the fiddled figures most governments use... which means either higher interest rates or big wage rises.

cneldred

that is wrong in my opinion, all the fed care about is inflation. that is why they have ignoring the housing crash. Whilst the government claim to maintain a strong dollar policy it is clear that is far from the truth. They are printing M3 like it is going out of fashion.

Greenspan (the previous govenor of FOMC) took the country into a recession in order to meet his targets. As soon as we see some more CPI data like yesterday on the weak side it will give the Fed the room to cut. Bill Gross made simular comments this morning and when he speaks people listen, he is rarely wrong.

MarkG

Cutting rates will cause a massive drop in the dollar and consequently a high level of inflation. There are so many dollars in the world after years of low interest rates that no-one wants to be stuck with them anymore.

They either cut rates, trash the dollar and import inflation, or raise rates and cause a faster house price collapse and recession. As far as I can see there's no way out this time, they burnt all their economic reserves in the Greenspan Bubble... now they have record government borrowing and a record trade deficit which requires record inflows of money from abroad.

Iain Mc

Have told my broker I'll swap a load if I can get 2.3 for it.

I'm hoping that'll come first week of May before the next rate decision. If not, I'll take whatever I can get for it at that time if it's over 2.25.

It's just a shame that last time I moved over there it was 2.5 (back in 97/98), mentally I have to convince myself that 2.25+ is actually very good (although a quick look at the trends graph over the last five years is generally enough)!

But don't beat yourself up about it, there's always a better rate around the corner - as long as you're happy at the time you make the decision, that's the main thing!

MarkG

After the Bank of England's rate cut in 2005 I was budgetting on the assumption of getting at least $1.80 to the pound, so $2.25 seems pretty good in comparison .

For those who think the US government can cut rates, it's worth considering just how far the pound fell after one single rate cut back then.