One of Those Weeks

No news is Good News (apparently)

It’s happening again.

Sterling is “punching above its weight” in the run up to the Summit of EU Heads of Government summit being held this week.

I have got myself short of Sterling on the back of several events taking place next week which on balance I believe will be negative for the pound.

This week has given me the opportunity to average in to a position with the high coming just below major resistance at 1.4000.

I know I have said this before, but I am constantly surprised how the market allows itself to be seduced into believing that Brexit is going to “all be alright in the end”. Personally, I feel that Messrs Tusk and Juncker will not give an inch in negotiations and have provided Michel Barnier with a narrow set of negotiating guidelines.

It seems that Ireland is going to be the major obstacle to an agreement, it just depends whether the summit is prepared to believe that further negotiations will yield a result. I also feel that the UK should be tougher over Ireland. Why not free Ireland from the customs union and single market allowing an open border with Northern Ireland rather that the utterly ludicrous idea of having the North be part of those EU treaties and a border in the middle of the sea.

Draghi continues to enhance his reputation

Mario Draghi, the President of the European Central Bank is, again as I have said before continually enhancing his reputation as a Central Banker. Unlike his counterparts in the UK and U.S. as well as Japan he remains above political machinations and favours no one when creating monetary policy to fit nineteen diverse economies.

This week, Sr. Draghi together with two of his colleagues from the Governing Council showed the unity that they feel in their policy decisions.

In the UK, the Bank of England is acting with one hand tied behind its back as it is, publicly at least, hardly consulted in Brexit negotiations. In the U.S. the new Fed Chair, Jay Powell appears, until we are proved otherwise, to be a political appointment. President Trump seems to want to blur the line between the Fed which creates monetary policy and the Treasury which handles the dollar.  

Sr. Draghi has pointedly avoided becoming involved in either political concerns or the individual desires of Eurozone members. It seems his overriding driver is the value of the common currency since that determines the ability of the weaker economies to export. He has even managed to convince Ecofin that a 20% rise in the value of the Euro in fifteen months has been a sufficient brake on inflation.

And in Cryptoland

I drew howls of derision and complaint this week when I wrote a piece on social media regarding the motive behind a few so-called experts almost frantic calls for Bitcoin in particular but cryptocurrencies in general to be trading far higher.

There was almost disbelief that bitcoin had fallen again close to $8k and frantic calls for those who feel they missed out on the last move up close to $20k to “buy, buy, buy!

I remarked that no one really needs to have the Bitcoin price on their PC before their eyes, just search #bitcoin on Linkedin and count how many positive comments there are per hour. It is a very strong indicator. The more analysts shouting “buy” the lower you will find Bitcoin is trading.

Apparently, the fall in Bitcoin was “Regulatory news driving trading volumes and a peak of positive sentiment pushing price; and a lack of fundamentals resulting in herding behaviour across increasingly correlated exchanges and cryptocurrencies.” So, now we know.

Since fundamental analysis hardly applies to cryptocurrencies yet, since we barely have any fundamentals to “hang our hats” upon, let just say that this week, there were more sellers than buyers.

However, one thing we should look at is concerns that are being raised in several communities in many countries of power usage in Bitcoin mining and the effect that would have if there were a choice between mining and staying warm in winter in several places.