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BIG day today data wise for the UK. CPI – a measure of how much prices have risen for September. Analysts are expecting +0.9% from +0.6% YoY which really is in line with what we are thinking given the 15-20% fall in GBP.
I am an avid reader of the newspaper The Daily Mail. I often get involved on the comments section (my handle is doubletot in case you were wondering) writing my views and comments on articles published online (those related to the GBP of course). Honestly having been in the markets for over 23 years and traded during some of the most volatile periods in our history it makes me laugh (and cry out loud) AT SOME OF THE STUPIDEST AND WEIRDEST COMMENTS I HAVE TO READ. Basically people are saying that the price rises are the result of the greedy bankers and corporates who are taking advantage of the current rate of exchange as well as the incompetent BoE Governor Carney (who they say only looks after the banks/bankers/funds). Seriously are these people totally demented? They further state that the GBP was overvalued to begin with and it is the banks and hedge funds (and BoE) that have driven the GBP lower rather than Brexit. Seriously!!! The GBP was nowhere near overvalued and given that the UK was the fastest growing economy (excl China India etc.) pre referendum, it was pretty fair to say the rate at 1.50 was spot on. In fact had we voted to Remain the GBP would currently be trading in the 1.47/1.52 range in my opinion after the US delayed raising rates in September.
We (the remainers) and I who wrote repeatedly that a leave win will send the GBP to 1.25 and send prices sky rocketing. We were not trying to scare people, we were telling it as it was. And so it came to pass that leave won and here we are. Marmitgate petrolgate pricerisegate you name it, the simple fact is the UK is a net IMPORTER and therefore the fall in the GBP has resulted in the higher costs for gasoline companies and food/manufacturing companies to bring their goods onshore. These higher costs are now being re-directed to the consumer who will find their take home pay cheque shrinking. We WARNED BREXIT followers. They never listened and now they blaming everyone else for the higher prices rather than themselves for being so short-sighted. I am still in denial at the prospect of leaving the EU. How has this happened? Why has this happened? How was it allowed to happen? While I certainly do agree with some of the issues surrounding Brussels and immigration there were other ways we could have tackled those issues. Unfortunately it was not to be and we now find ourselves paying £1.16l at the pumps not to mention the price rises in food and clothing. It is no wonder foreigners are flocking to the UK to buy goods and property. They are 20% LOWER than 23 June. Remember when the GBPUSD hit 2.11 and we all flocked to the States laughing how cheap Ipad/phone/clothes/hotels were. Swings and roundabouts and now it’s happening to us. The extra spending by the tourists will help retailers but certainly not fill the gap left by locals who have tightened their belts. Retails already coming out saying how bad things are and talk is another BIG name on the high street is going to throw in the towel. Well done Leavers and well done to our new PM (for pressing ahead for a hard Brexit). Oh what I would do to have Mr Cameron and Osborne back again. I miss them.
So on this fine Tuesday morning ladies and gents I would like to welcome you to GREATER rip off Britain. Make sure you keep your job, tighten your belt, hold back on buying unnecessary items and start saving.
With the impending release of the CPI number, the GBPUSD has rallied (if you can call it a rally) to trade at 1.2250 and EUR GBP 0.9000 (GBPEUR 1.1111) …. The reason is with CPI rising the logical thing would be to raise interest rates. However with the economy likely to shrink from 2.8% GDP to 0.80% next year the Governor is absolutely right and should leave rates where they are until things settle down. Exporters are high fiving each other so that should help short term…but and as I said in my comment on the DM – the UK is a net importer of goods and services, and therefore companies will simply have to raise prices which will be passed on to you and I – or what refuse to pay the higher prices and risk going out of business? I think you know the answer to that question.
My favourite saying whilst living in South Africa was “kak and betaal” which simply translates into “cough and pay” – I reckon that says it all.
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