Daily Alert – Thursday 9th February 2023: BofE screams SHORT THE POUND

Mark NugentDaily Alert, Feb 2023

Daily Alert – Thursday 9th February 2023: BofE screams SHORT THE POUND

Good morning.

Yesterday we had the Monetary Policy Report Hearings where Bank of England officials go in front of politicians to answer their questions. It’s a bit like eagles vs turkeys, where the turkeys don’t know they’re turkeys. They never do. It’s classic Dunning-Kruger.

Anyway, the eagles said, variously, “pay settlement data for this year are inconsistent with inflation target”. That’s the well-known wage-price spiral. “Economic theory shows uncertainty around inflation should be met with more forceful action”. That’s a bit hawkish, isn’t it? “Base effects will drive inflation down this year”. That’s just the initial price increases in food and energy falling out of the 12-month year-on-year data window. “I anticipate an extended period of weakness in UK economic activity”. OK. That and everything else says SHORT THE POUND.

Over in the US, there was yet more hawkishness from the Fed.

Also, USD300 bln of short bets on US equities have been unwound. That must happen before a bullish run. Just as well I changed by bias on equities to long.

I’ll be back tomorrow with a brief video on last week’s successful S&P500 trade.

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