Its a race between who will raise rates first GB or the US…..anytime a country is in a rate increase cycle the currency is bid/bullish and the opposite reaction is when a country is cutting its interest rates.
GB’s BOE today announced they will put their first rate hike since 2009 on hold…why?….the rest of Europe and especially Germany’s data just plain stinks!…DEFlation!
The British Pound fell almost a full cent…..remember Oct 8th when the Fed minutes hinted that the board was concerned about the strength of the US$ which as QE ends and the US enters the Spin Cycle of when to raise rates of course the $ is going to rise….duh!
So on time QE will end and the focus will turn to when the first rate hike will take place in the US…well get ready for more excuses as to why its not going to happen, using Europe or Japan or even China as an excuse…..the REAL reason, the ticking time bomb of European debt is coming back into focus and regardless of higher rates in the US or not, the US$ will continue to strengthen and when Big Capital is flowing into the US$’s there is no way in Hell that Mrs Doubtfire is going to raise rates….. unless they actually want a 110 US$ Index by next summer
So although I’m firmly in the much, much lower $Yen and Euro$ camp its going to be one Wild and Crazy ride! as the Central Bankers try and hold back the US$ advancement….good luck!