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“To cap the morning off, the founder of Binance says he thinks the creator of Bitcoin was an AI from the future. Really. Expand your grid immediately - or risk blackouts,” - Sir Michael Every, Rabobank.
Pound Sterling was ‘standing to’ on Tuesday after the Chinese Renminbi seemingly sought to prevent the Graceful and New going out to the Carribean Blue, leading an old band to sing, “I’ll be watching you.”
GBP/USD surged on Monday and in the process all but eroded a major technical resistance around 1.3427, however, the water was far from Carribean Blue and there was something of an arw ni veneah along the way.
Some of those words are like anagrammatic because if written plainly they would risk becoming sacrilegious.
GBP/USD’s rose by around 1% on Monday but there was a four-hour period in which it was stymied around 1.3351, during which there were even sharper upward movements in GBP/EUR and GBP/CHF,. Later, GBP/USD surged even further as USD/GBP, USD/NOK and USD/SEK slumped in North American trade.
Above: GBP/USD shown at 15-minute intervals with GBP/CHF, GBP/EUR, GBP/CNY.
The intense and sustained co-movement between GBP/USD and GBP/CNY throughout Monday shows that China’s Renminbi had the most powerful and all-encompassing influence on Sterling in this period. That’s according to this research from the Bank of England, and this from the Bank for International Settlements.
The four-hour stall at 1.3351 and co-movement with GBP/CNY was something of a signed confession from the People’s Bank of China, one telling of an attempt to hold down GBP/USD even though GBP/CNY did not come close to the upper limit of its daily band until GBP/USD reach 1.3450 ahead of the New York close.
Beijing raised its limits for GBP/CNY on Tuesday so that GBP/USD could rise as far as 1.3738 before GBP/CNY would be in any danger of crossing its band. However, if the PBoC seeks to manage either GBP or USD, rather than the RMB, on Tuesday then GBP/USD would likely struggle to get above 1.3466 without another intervention by Monday’s Knights of the Round Table.
As an aside, and for those who lack the patience or inclination toward the financial market jargon adorning most of this page, there is a bigger and better story in the songs and videos chronograph throughout the article, one that is each and every bit as true as the currency story.
Above: The Police; I’ll be Watching You. Source: Youtube.
For readers who don’t know, the PBoC operates a managed-floating exchange rate in relation to the 25 currencies contained in the China Foreign Exchange Trade System Index, including Sterling, with a view to ensuring the Renminbi remains “basically stable” in a trade-weighted sense.
The success of this policy is why the RMB/CFETS index has not appreciated at all in the almost-ten years since the benchmark was first announced in something like December 2015. However, this basket-based approach to the currency and the US Dollar’s intermediary role in the market have together created a quasi peg between the trade-weighted US Dollar and the trade-weighted Renminbi.
This matters because one of those currencies is “undervalued” in an economically troublesome way, while the other is “overvalued” in a similarly problematic respect, and because both currencies have come under intense pressure since US President Donald Trump’s “Liberation Day” tariff announcement on April 2.
That pressure has at times appeared to be mutually reinforcing, however, the PBoC has been actively battling against it, while US government officials have been publicly proclaiming to have a so-called strong Dollar policy; All the while implementing policies that actively undermine the currency and its local asset markets.
Above: Enya; One Toy Soldier. Source: Youtube.
Some of the most intense declines came in the lead up to Passover and Holy Week in an effective recasting and retelling of the Exodus story. This describes the escape of some early Israelites from Egypt, in the Old Testament book of the same name, a story in which Moses receives commandments and a covenant while sojourning on a mountain, only for the latter to later be broken, leading to the events described in the Book of Jeremiah where it says "the people of both Israel and Judah have done evil and aroused my anger by burning incense to Baal," among other things. The Exodus story can be found in Chapters 12:20, and the covenant in the Chapters up to 24.
The Exodus story is still very much a live theme it would appear, and not solely because US tariff policies are likely to undermine profits and earnings for corporate America in the near-to-medium term, but also because market-multiples-based valuations are currently obscene and gluttonous.
“There has been a sharp stop of foreign investor inflow into US bond and equity markets over the last two months. Our broad takeaway is that the flow evidence so far points to an, at best, very rapid slowing in US capital inflows and, at worst, continued active disinvestment from US assets,” says George Saravelos, head of FX research at Deutsche Bank, writing in a Monday research briefing.
Others have suggested tariffs will lead to a destruction of capital through the impact they have on the so-called supply capacity of the US economy, thus undermining its value, and that might not be entirely an academic mythology. Irrespectively, it is one of numerous reasons many in and around the market now see the Dollar as still having further to fall, and in some cases, the forecasts are for significant falls.
Above: Enya; The Celts. Source: Youtube. Reader Question: Who might be the aged man wearing the crown in the video?? Graceful and New could show you.
“The USD is strong, is very elevated and is way overvalued on a lot of metrics. The USD needs some air let out of the balloon and any rebalancing of global economic imbalances will naturally involve some USD weakness. But I would argue we are in the first inning of a very long, quarters and years, not weeks and months, type of process,” says Brad Bechtel, global head of FX, at Jefferies.
“China could speed up this process by revaluing the RMB stronger, if they chose to, and maybe we still end up in that place down the road. As much as the USD is overvalued the RMB is extremely undervalued and due for a rally. If China and the US can agree to put USD/CNY to 6.0000 instead of 7.2100 it would greatly help the imbalances we all care about,” he adds, in a research briefing on Friday.
All of this is why the People’s Bank of China ideally needs to reconsider the merits of the quasi peg it maintains between the Renminbi and US Dollar, and if it really and truly does want a stronger currency, should perhaps ought to consider re-pegging the Renminbi to another currency better able to accommodate its strength.
Pound Sterling would be a perfectly viable option for Beijing because one way or the other, it is now on a one-way trip to the topside, one in which it evolves into something like the ‘sion’ of a tall and ever growing tree, one of two Willows on the Water, while acting as a source of life for a healing ‘Pool of Bethesda’ below. Further details; Pound to Dollar Forecast: Graceful and New Takes to Caribbean Blue.
Above: Enya; On My Way Home. Source: Youtube.
Readings for the inclined;
Everything I do here is for nothing less than The Glory of God; the Lord of Lords and the King of Kings.
“Bless the Lord, oh his Holy Name, and all that is within me, Bless his Holy Name, Bless the Lord, oh my soul, and forget not all his benefits,” - Psalm 103, A Psalm of David, KJV.
“I waited patiently for the Lord; and he inclined unto me, and heard my cry. He brought me up also out of a horrible pit, out of the miry clay, and set my feet upon a rock, and established my goings. And he hath put a new song into my mouth, even praise unto our God: many shall see it, and fear, and trust in the Lord,” - Psalm 40, To the Chief Musician, A Psalm of David.
Exodus - Chapters 1:29
Jeremiah 30 - Full Chapter
Jeremiah 31 - Full Chapter
John 5 - Full Chapter
Trivia: The name Enya is more than just an anagram for the Amharic words “Yane” and “Ayne.”
Above: Enya; Athair Ar Neamh (Father in Heaven). Source: Youtube.