Sonia, Yields and GBP: Levels, Ranges, Targets

Never lose sight of the progression money supply, interest rates, exchange rates, other Financial instruments then last is economic announcements. Does Inflation dictate a currency price direction. Seems this answer is no. This lineup below is for other questions /purposes but since its written, it will post. My question  as the BOE finalized its new interest rate system, what was the repercussion to GBP. On this day, its tough to answer because all nation interest rates including UK are trading in wide ranges, especially AUD if that concept could be imagined. Every nation’s orientation to its interest rates are quite different from each other but the commonality is ranges remain a constant and explains currency prices in many regards. USD leads the way and is the big dictator and follower on world markets.

Sonia and Repo’s Today

0.4688

0.4700

0.4750

AVG = 0.4820

0.4850

0.4929

0.5008

0.5254

0.5500

AVG = 0.4925 = 1.4166 GBP/USD at 1.4929 and 150.15 GBP/JPY

Interest rates are miles to high particularly when GDP at 0.40 is low and Inflation at 0.3% is miles to high. The GDP/ Inflation relationship is 0.004 to 0.03. Lower Inflation, then GDP higher. GBP as well is far to high

Bond Yields

Swap Rates 3 m to 0.39 = 0.07

Overnight minus 3 month = 0.02

Overnight minus Repo = 0.07

Overnight minus 0.5008 = 0.03 = Inflation.

GBP/USD Break Point 1.3735.

3m = 0.39

GDP = 0.4 and below 0.445 AVG.

6m = 0.50

1y = 0.71

10Y minus 2 = 0.69

2y = 0.82

3y = 0.86

4y= 1.02

10 minus 3 month = 1.12

30 minus 2 = 1.08

5 y = 1.17

6y = 1.23

7y = 1.31

8y = 1.41

9y= 1.53

10y= 1.51    AVG 1.03.

 

Brian Twomey