Reasons behind the fall of the pound sterling

I was analyzing the main catalysts that have caused the recent fall of the pound... and these are the ones that occurred to me. First, many investors thought that the United Kingdom was going to normalize its monetary policy at the same pace as the Fed. That did not happen... which caused capital to move from the pound to the dollar. Second, the fear of Brexit has reappeared, even in small doses... and that has also pushed a little bit into the market. Third, several influential financial analysts have been insisting that the pound is overvalued, and that has also moved the waters. The pound has gone down hard enough for only these three factors to explain it. Does anyone have in mind any other logical catalyst that could have pushed retail or institutional investors to move tabs? I mean objective reasons, beyond price feedback, which always commands. "We don't have to fear a bubble... until it starts to explode."

The factors you mentioned are already more than enough to justify the fall... if you hoc legee scis nimium eruditionis habes

Yes, those three points may be enough, but the fall has been quite aggressive in a short time. I wonder if there’s anything else behind the scenes we’re not seeing.

The British government is more divided than ever, and that does not exactly inspire confidence in the markets.

What about macro data? Latest reports of GDP, inflation and consumption have been one disappointment after another. You don’t need to be a genius to predict the reaction.

Did anyone think that the pound was going to stay strong with all the uncertainty in Europe and the UK at the same time?

Okay, so can we say it's more a sum of negative factors than a single, clear cause?

Totally. This is like a pressure cooker: every factor adds pressure and suddenly... boom! Exaggerated market reaction.

And let's not forget the appetite for the dollar lately. With the Fed climbing guys and the dollar in tank mode, everything else looks like wet paper.

The hedge funds have also begun to cut exposure to the pound. When they leave, the fall accelerates itself.

A fall of this magnitude does not occur without the invisible hand of the great ones. Do not underestimate the institutional influence.

Very true, I'm surprised no one mentioned negative swaps.

Great point. The cost of maintaining long positions is pushing many to close positions even with small losses. That accelerates the decline.

And of course algorithms don't help, when chain stops are activated, liquidity evaporates and everything falls faster.

We saw this before Brexit. It’s the typical pattern of accumulated mistrust. Pounds always pay for broken dishes.

Do you think this can go on or is it already oversold?

It's oversold, yes, but that doesn't stop it from falling any further.

Oversold does not mean immediate rebound. You may be oversold for weeks. Ask the yen.

The RSI in 20 is useless when the fundamentals are rotten. That's buying because it's cheap is rookie.

It will depend on the tone of the next BoE speech. If you stay warm with the guys, the sangria will follow.

Good point. The BoE has been very passive compared to the Fed. Will it be afraid to slow growth or simply lack of conviction?

I would say monetary cowardice. They still believe that everything will be fixed only while the dollar passes over them.

Look, there are also internal social pressures. Going up types now would be to set half a country on fire. Inflation is already hitting hard.

And when has he not? Always excuses not to act. Then we are surprised when the coin collapses.

An extra reason: British banking is seeing capital leak into Europe. Many large customers are moving positions to Frankfurt and Paris.

If institutional capital flees, the pound has no salvation for now.

The worst thing is that no one talks about it in the media. They only focus on macro data without seeing the real background.

Because admitting that is like accepting that the City is losing power, and politically it doesn't suit them.

The reality is that London is no longer the financial center it used to be, and that does affect the value of its currency.

What do you think of the effect of a technical recession in the UK? Could it be the final catalyst for another bassist stretch?

If recession is confirmed, another wave of sales is coming. No one wants to keep currency from a stagnant country and without recovery plan.

The recession is largely discounted, but if the BoE does nothing, then we will see new minima.

The recession is not the worst. The serious thing would be a recession with high inflation and no tools to fight it. Estanflation 2.0.

So the consensus is that the fall has even more to do with it?

There's no consensus, there's fear, and fear never warns when it's going to stop.

The market will tell you when the fall ended, not analysts.

As long as there's no change in narrative, I've got shorts open since 1.2645.

Short since 1,2730, SL at 1,2801, open PT. This smells like more blood.

Is anyone considering long-term purchases at these levels?

Buy now? Only if you want to donate your money to the market. This is not bought without a clear signal.