Hi there 
This is Felix writing. I wanted to share with you my outlook for the month of June, 2008.
I just recently sent in an order to my bank to go short on GBP/CHF. In
my opinion, considering the current circumstances, the strongest
currency out of the 8 majors is Swiss Frank, and the weakest is Great
British Pound.
I actually initially called a short on GBP/CHF back in December of
2007. During that time, everybody was being crazy about shorting GBP/
JPY, which was definitely a good thing, but I remember talking over the
telephone with my partner Sir Pipsalot, who is running the
ForexDiamonds.com service, and I told him that I think a short on GBP/
CHF is even better than a short on GBP/JPY.
Well, to make the long story short, in 2008, on global scale, Swiss
Frank gained 7.19%, and Great British Pound lost -3.07%. In comparison
to Swiss Frank, the Yen only gained 0.48%.
Yep, it seems like everybody was talking about the strong Euro and
strong Aussie in 2008, but in reality, Swiss Frank outperformed them
both. Here are the detailed statistics on all 8 currencies:
CHF: +7.19%
AUD: +5.72%
EUR: +4.08%
JPY: +0.48%
USD: -2.32%
GBP: -3.07%
CAD: -5.18%
NZD: -5.19%
Looking at these statistics, you may be wondering how in the world I
came up with these numbers? Well, the way I came up with them is I
compared each currency against the 7 other currencies, then I derived
an average from that. This way, we can not only know how a currency
performed against one other currency, but we can know the average
against all the other 7 majors.
I actually requested a programmer to build me a calculator to do that.
This way I could see in one snapshot the overall picture for today or
yesterday, or for last week, or last month, or any custom date. And we
are actually going to offer this calculator as free tool for our
ForexPeaceArmy community. Wait for an announcement on that sometime
this month. I believe this tool would improve your trading.
Anyway, sorry about that, it seems like I got a bit carried away here. Let's go back to our GBP/CHF short.
Here is the situation. The UK economy has been put in a tough
situation. Their inflation is going up, while their overall economy is
slowing down. So there has been a lot of uncertainty about the UK
interest rate which is at 5.00%, which is still very high, comparing to
the rest of the world.
So what has happened, is in the month of June, GBP has actually gained
value, because there were speculations of further rate hikes. You may
be surprised to hear that, because it seems like GBP/USD is going down.
The reason it's going down is that US dollar has gained even more value
than GBP. But if you compare GBP against all the other 7 majors, and
derive an average, it's actually gained around 1.06%, just in 10 days,
which is a lot.
So to make the long story short, the market is currently pricing in
rate hikes from the UK, which are highly unlikely, so if there is a cut
in the next 3 months, it would be a big surprise, and the pound will
lose a lot of value.
On the other hand, the Swiss government seems to be very happy about
their interest rate of 2.75%, and the market is still pricing a
possible cut by the end of the year. Regardless of it, the CHF has
gained 1% in May, and already gained 1.86% in June comparing to the
average of the other 7 majors.
So we are definitely seeing a solid trend of falling pound, and solid
trend of rising Swiss Frank. Please note that the pound is falling,
despite their high interest rate, and if they cut, it would only
aggravate the fall. On the other hand, the Swiss Frank is rising,
despite the fact that there are talks about possibility of rate cut by
the end of the year. So if they decide to stay on hold, or even hike,
it would only put fuel into already rising frank.
I hope I am making sense here, and of course once that calculator is
posted, you will be able to have a very invaluable tool to your
trading.
That's all I have to say for this month. Next month, July, one of my
friends who is managing a fund of several hundred million promised to
write up his take on the forex market I personally look forward to that analysis.
What do you think about what I said about Pound and Frank? I'd love to hear your feedback and your 10 cents on the issue.
Thanks
-Felix
Source:
http://www.forexpeacearmy.com/
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