Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Economy

Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Currencies, Equities

Scary movie sequel beckons for eurozone markets

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors. Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German […]

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Banks

Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Banks, Financial

Banking app targets millennials who want help budgeting

Graduate debt, rent and high living costs have made it hard for millennials to save for a house, a pension or even a holiday. For Ollie Purdue, a 23-year-old law graduate, this was reason enough to launch Loot, a banking app targeted at tech-dependent 20-somethings who want help to manage their money and avoid falling […]

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Categorized | Currencies

Traders love big round numbers


Posted on August 31, 2016

File photo dated 21/05/16 of a 1 euro coin and a One Pound coin placed on a backdrop of The European flag, as Sterling found some respite in overnight trading on Tuesday after taking a Brexit battering that saw it fall to a 31-year low. PRESS ASSOCIATION Photo. Issue date: Tuesday June 28, 2016. The pound rose 0.7% to 1.33 dollars, a rebound from Monday's 1.31 dollars, its lowest level since 1985. See PA story CITY Pound. Photo credit should read: Yui Mok/PA Wire©PA

Traders love big round numbers.

They provide a talking point, and just by dint of their huge fat simplicity can sometimes seem to display a gravitational pull on the market.

    Once reached, or breached, they can provide more fun as those stops placed around the figure get swiftly triggered, exacerbating momentum.

    Popular right now is the idea that the ultimate fallout from the Brexit vote will help deliver a euro to pound exchange rate of 1.

    But with EUR/GBP currently about £0.85, how feasible is parity anytime soon?

    Not very, many analysts reckon.

    Helping sterling weaken to one euro would be a more aggressive than expected easing by the Bank of England relative to the European Central Bank, argue pound bears.

    But Bank of America Merrill Lynch says such policy divergences are unlikely to be so great that they deliver a 15p fall for sterling, especially since, against a number of metrics, the UK unit is not especially overvalued right now.

    Further more, the market is already very negative on the pound.

    As Capital Economics notes, the record net short positions in sterling futures represent “selling that has already taken place”.

    Still, from the euro’s side there seems to be a growing view that the ECB next week may not deliver the aggressive easing the market expects.

    If so, that may be expected to boost the euro, yet traders know the single currency sometimes can react counter-intuitively to ECB actions.

    jamie.chisholm@ft.com