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- GBP Takes A Pounding.
GBP Takes A Pounding.
Morning, Money Makers!
Jordon Mellor & Jonathan Kibbler
January 12, 2025 • Estimated Reading Time: 5 minutes
In partnership with
Morning sleepy head, Hope you’re caffeinated, because the market’s been up to its usual tricks. Let’s dive in.
Macro Gossip
THE POUND TAKES A POUNDING.
The UK financial markets are having a bit of a wobble, and it’s worth paying attention. Gilts (government bonds) have taken a dive, with yields climbing as investors give a collective side-eye to the government’s "spend cuts, tax rises" fiscal plans.
Meanwhile, the pound has hit a new low against the dollar, making it a decidedly unappealing option for carry trades. Throw in sticky inflation and rising stagflation risks, and it’s starting to feel like the UK economy is stuck in reverse. Even Chancellor Rachel Reeves is facing mounting pressure as market sentiment begins calling the shots.
Forex Pair To Watch:
While the UK struggles with sluggish growth and fiscal uncertainty, Norway’s economy is looking like a solid counterpoint with stable growth prospects. If this divergence continues, traders could find opportunities to take advantage on GBP/NOK.
The Boss’s Take: “Fiscal policy seems to be the driver here, but stagflation is a real risk here! This would be a tough one to fix!”
Quick & Dirty Trade
Swipe Right on NVIDIA?
Got a minute? Perfect, here’s the view of Nvidia this week:
Pros: NVIDIA dominates the high-end graphics card market, powering gaming PCs, data centers, and increasingly, AI workloads. Their cutting-edge technology, strong brand recognition, and robust ecosystem give them a significant competitive advantage. They just undercut themselves with the brand new 5070 which is going viral.
Cons: The cryptocurrency mining boom significantly impacted GPU availability and prices in the past. While this has subsided, the market remains susceptible to supply chain disruptions and the rapid pace of technological advancement. Competition is also intensifying, with AMD and other players vying for market share.
Verdict? Swipe right if you’re into gains; swipe left if you are a skeptic.
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Macro Insight, Micro Impact
Aussie CPI (trimmed) close to RBA Target.
Plot Twist of the Week: We all know the RBA (Reserve Bank Of Australia) has been a stickler in the mud through-out the past 12 months. They have taken a strong approach and so far, a right approach. However, one of the key measures and influences in bring rates down, has just hit its target.
Why This Matters:
The RBA could look to drop interest rates in Australia.
Australian stocks might find a small rebound even in the eye of the Chinese economic turmoil.
Will the RBA finally drop rates? Stay tuned.
Macro Hack of the Week: US10YR To 5%…Again?
USD traders will benefit from the strong correlation between the US 10-YR Government Yields, as stronger yields here often lead to a stonger currency.
What happens if we reach 5%?
This is a story to keep a close eye on especially if you’re trading major FX pairs. USD strength could begin to stall if the yields reach the 5% level once again.
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