1
00:00:00,800 --> 00:00:03,800
Speaker 1: You're listening to Taking Stock with Kathleen Hayes and Pim

2
00:00:03,880 --> 00:00:08,000
Speaker 1: Fox on Bloomberg Radio. A tough week for the pound,

3
00:00:08,200 --> 00:00:10,959
Speaker 1: A tough night for the pound. The British pound was

4
00:00:11,039 --> 00:00:15,920
Speaker 1: already under great pressure this past week, uh sparked by

5
00:00:15,960 --> 00:00:19,720
Speaker 1: Prime Minister Theresa's May, Theresa May's timetable for Britain's withdrawal

6
00:00:19,720 --> 00:00:22,119
Speaker 1: from the European Union and concerns it might prove to

7
00:00:22,200 --> 00:00:26,880
Speaker 1: be a hard Brexit. But then something happened. Just shortly

8
00:00:26,920 --> 00:00:30,880
Speaker 1: after seven o'clock Eastern The pound dropped about six percent

9
00:00:31,360 --> 00:00:35,519
Speaker 1: in two minutes, sparking Bank of England Governor Mark Harney

10
00:00:35,600 --> 00:00:38,360
Speaker 1: to ask the Bank for International seven months to look

11
00:00:38,680 --> 00:00:42,360
Speaker 1: and see what happened. Joining US now is Kit Jooks.

12
00:00:42,400 --> 00:00:45,760
Speaker 1: He joins US from London, where he's global head of

13
00:00:45,840 --> 00:00:50,479
Speaker 1: Foreign Exchange Strategy at Society General. So Kit, I was

14
00:00:50,520 --> 00:00:53,040
Speaker 1: sitting I was sitting here on the on the Bloomberg

15
00:00:53,040 --> 00:00:55,680
Speaker 1: News set taking part in Dabria Asia for Bloomberg Radio

16
00:00:55,720 --> 00:00:59,000
Speaker 1: and Television, and Sherry On from our Hong Kong office

17
00:00:59,000 --> 00:01:00,680
Speaker 1: came out and almost at the very top of a

18
00:01:00,680 --> 00:01:05,280
Speaker 1: report said the pound, it's down. It was crazy move.

19
00:01:05,319 --> 00:01:11,040
Speaker 1: What happened? Well, you know, I was. I was definitely

20
00:01:11,040 --> 00:01:14,080
Speaker 1: fast asleep. It's that's that's that's just after midnight our time,

21
00:01:14,120 --> 00:01:16,600
Speaker 1: so no chance of my being awake with a seven

22
00:01:16,640 --> 00:01:19,880
Speaker 1: am morning meeting here. But the I don't know. You know,

23
00:01:19,959 --> 00:01:23,440
Speaker 1: that time of day is when financial market liquidity it's

24
00:01:23,520 --> 00:01:25,600
Speaker 1: thin or odd because THEO has just come in, so

25
00:01:25,680 --> 00:01:29,040
Speaker 1: people have things to do. But there's not necessarily a

26
00:01:29,040 --> 00:01:31,039
Speaker 1: lot of natural liquidity of people who want to say

27
00:01:31,080 --> 00:01:33,360
Speaker 1: I'll take the other side. So if someone wants to

28
00:01:33,400 --> 00:01:37,160
Speaker 1: sell a currency or anything, um, you know, the market

29
00:01:37,240 --> 00:01:39,080
Speaker 1: needs someone to come on the other side and said, yeah,

30
00:01:39,080 --> 00:01:41,640
Speaker 1: that looks cheap, I'll buy that lower down and um.

31
00:01:41,720 --> 00:01:44,720
Speaker 1: In this instance, whether someone put in a cell order

32
00:01:44,760 --> 00:01:47,560
Speaker 1: at the wrong price, whether there was some some you know,

33
00:01:47,560 --> 00:01:50,040
Speaker 1: whether a computer program did something to sell something at

34
00:01:50,040 --> 00:01:52,600
Speaker 1: the wrong price too low or too much, or whether

35
00:01:52,680 --> 00:01:56,520
Speaker 1: just just the weight generally of people being concerned about

36
00:01:56,560 --> 00:01:59,000
Speaker 1: the UK use all week and by Friday morning there

37
00:01:59,080 --> 00:02:02,600
Speaker 1: just wasn't any what you prepared to bid for something

38
00:02:02,640 --> 00:02:05,120
Speaker 1: that someone settling, so the price tumble stumble stumbles, and

39
00:02:05,160 --> 00:02:07,920
Speaker 1: then everybody goes, Okay, I'll make you have a coffee.

40
00:02:07,960 --> 00:02:10,079
Speaker 1: I'm not going to join this game and it gets

41
00:02:10,080 --> 00:02:13,280
Speaker 1: out of control. But they'll they'll they'll look through it.

42
00:02:13,320 --> 00:02:15,480
Speaker 1: But I'm you know, we'll call it that. We'll call

43
00:02:15,520 --> 00:02:18,400
Speaker 1: it a fat finger or a flash crash. Um. But

44
00:02:18,919 --> 00:02:20,920
Speaker 1: they're always the way around that the market was going

45
00:02:20,960 --> 00:02:23,760
Speaker 1: before we started that. That's a feature of these flash crashes.

46
00:02:24,400 --> 00:02:27,800
Speaker 1: Kit chukes am I to believe that the central banks

47
00:02:27,840 --> 00:02:30,400
Speaker 1: around the world, let's just leave the Federal Reserve out

48
00:02:30,440 --> 00:02:32,880
Speaker 1: of this for a moment, are trying to devalue the

49
00:02:32,960 --> 00:02:38,720
Speaker 1: currencies of their respective regions in order to promote economic growth.

50
00:02:40,160 --> 00:02:42,760
Speaker 1: I don't think anyone's trying to devalue their currencies very

51
00:02:42,800 --> 00:02:44,200
Speaker 1: much at the moment. They're trying very hard to make

52
00:02:44,240 --> 00:02:47,120
Speaker 1: their currencies not go up. Marginally different kind of spin

53
00:02:47,200 --> 00:02:50,120
Speaker 1: on that for you. But at this point in time,

54
00:02:50,760 --> 00:02:52,679
Speaker 1: you know, the European Central Bank doesn't want the euro

55
00:02:52,800 --> 00:02:56,679
Speaker 1: to strengthen it having weakened the I noted that the

56
00:02:56,720 --> 00:02:58,919
Speaker 1: authorities in Brazil said they thought it was about time

57
00:02:58,960 --> 00:03:01,839
Speaker 1: the FED raised interest. It's as then, we really don't

58
00:03:01,840 --> 00:03:04,080
Speaker 1: want our currency, which is the strongest currency in the

59
00:03:04,160 --> 00:03:06,760
Speaker 1: last week in the world, to go up any further.

60
00:03:07,000 --> 00:03:11,000
Speaker 1: Thanks so trying to get their currencies to weaken, you know,

61
00:03:11,200 --> 00:03:13,720
Speaker 1: trying to prevent or hoping or wishing they wouldn't get

62
00:03:13,760 --> 00:03:15,960
Speaker 1: any stronger. The reason I put it in that in

63
00:03:15,960 --> 00:03:18,600
Speaker 1: that context is I'm wondering whether you can make a

64
00:03:18,639 --> 00:03:22,720
Speaker 1: case for the British electorate having done the work of

65
00:03:22,760 --> 00:03:27,120
Speaker 1: a central bank by working to devalue the currency and

66
00:03:27,160 --> 00:03:32,160
Speaker 1: also helped to stimulate exports and investment in the United Kingdom.

67
00:03:32,760 --> 00:03:36,520
Speaker 1: Definitely look you in I'm sure that somewhere in my

68
00:03:36,880 --> 00:03:40,040
Speaker 1: undergraduate years, more years ago than I care to think about,

69
00:03:40,880 --> 00:03:42,800
Speaker 1: you have looked at the situation and said, if you

70
00:03:42,880 --> 00:03:46,040
Speaker 1: had a negative terms of trade shock, which the UK

71
00:03:46,160 --> 00:03:48,640
Speaker 1: has decided to vote for in the UK government has

72
00:03:48,800 --> 00:03:53,920
Speaker 1: has decided to make happen, you will naturally need fall

73
00:03:53,960 --> 00:03:57,200
Speaker 1: in your exchange rate to reach new equilibrium. I'm sure

74
00:03:57,240 --> 00:03:59,040
Speaker 1: I can see a picture of that in a textbook

75
00:03:59,040 --> 00:04:03,200
Speaker 1: in my mind, and we're trying to make that textbook

76
00:04:03,200 --> 00:04:05,680
Speaker 1: work right now, and we're all pulling the same way.

77
00:04:05,760 --> 00:04:10,840
Speaker 1: So a week of pound is a necessary outcome of

78
00:04:10,920 --> 00:04:13,960
Speaker 1: the terms of trade shock, which is what to me

79
00:04:14,120 --> 00:04:15,800
Speaker 1: is what happens if you stick a spanner in the

80
00:04:15,840 --> 00:04:19,120
Speaker 1: spokes of the of the wheel of your global trade

81
00:04:19,120 --> 00:04:24,200
Speaker 1: partners ruin your significantly damage your biggest trade relationship, and

82
00:04:24,360 --> 00:04:26,559
Speaker 1: sit there hoping you can stay on the bicycle without

83
00:04:26,560 --> 00:04:30,040
Speaker 1: falling flat in your face. Now, Um, the dollar rally,

84
00:04:30,080 --> 00:04:32,840
Speaker 1: and of course that means other currencies are weakening. Uh,

85
00:04:33,200 --> 00:04:37,640
Speaker 1: seems even more in place since this job support came

86
00:04:37,640 --> 00:04:40,600
Speaker 1: in strong enough to solidify this view of a December

87
00:04:40,640 --> 00:04:43,400
Speaker 1: rene hike. But we just had a guest, Uh, Tom

88
00:04:43,440 --> 00:04:47,240
Speaker 1: Gimball from La Saul. It's an executive type hiring search firm,

89
00:04:47,880 --> 00:04:51,680
Speaker 1: um say, echoed by Ethan Harris, a Bank of America Marylynn.

90
00:04:51,720 --> 00:04:53,679
Speaker 1: She's been on an eighteen day trip around the world

91
00:04:54,000 --> 00:04:56,560
Speaker 1: that for domestically and for a lot of people overseas.

92
00:04:56,600 --> 00:04:58,960
Speaker 1: Now it isn't so much the Fed they're watching in

93
00:04:59,000 --> 00:05:01,400
Speaker 1: the next few weeks. It's the outcome of the election.

94
00:05:02,320 --> 00:05:05,360
Speaker 1: And the idea seems to be if Donald Trump gets elected,

95
00:05:05,400 --> 00:05:07,680
Speaker 1: look out because it's a huge uncertainty what would that

96
00:05:07,680 --> 00:05:11,479
Speaker 1: mean for the dollar? Back to front for the dollar

97
00:05:11,560 --> 00:05:15,480
Speaker 1: because you're the world's biggest reserve currency. If if if

98
00:05:15,560 --> 00:05:18,200
Speaker 1: uncertainty about the economic outlook in the wake of the

99
00:05:18,360 --> 00:05:23,279
Speaker 1: of the presidential election results in investors being skittish, scared

100
00:05:23,600 --> 00:05:29,400
Speaker 1: risk averse. They'll sell those Brazilian rayale, they'll sell Asian counties,

101
00:05:29,400 --> 00:05:31,680
Speaker 1: they'll move out of all the assets that they've been

102
00:05:31,680 --> 00:05:34,920
Speaker 1: buying that had higher yields, and they'll revert to the

103
00:05:34,920 --> 00:05:37,599
Speaker 1: safest thing they know, which is something at the front

104
00:05:37,680 --> 00:05:40,039
Speaker 1: end of the US Treasury curve that that's cash or

105
00:05:40,080 --> 00:05:42,880
Speaker 1: cash like, and the dollar will go up, not down.

106
00:05:43,600 --> 00:05:46,520
Speaker 1: And that's the feature of the US dollar. So um,

107
00:05:46,560 --> 00:05:49,880
Speaker 1: I would I would bet that the Donald Trump presidency

108
00:05:50,000 --> 00:05:52,960
Speaker 1: is um is good for the dollar against the whole

109
00:05:53,000 --> 00:05:54,960
Speaker 1: load of the world's biggest country, is bad for the

110
00:05:55,000 --> 00:05:57,600
Speaker 1: Canadian dollar and the Mexican pay so which between them,

111
00:05:58,560 --> 00:06:01,040
Speaker 1: nearly a quarter of the trade had waited the index

112
00:06:01,080 --> 00:06:02,720
Speaker 1: of the US or nearly a quarter of US trade

113
00:06:02,760 --> 00:06:05,720
Speaker 1: goes up north or south. Thanks very much. Kit Juke's

114
00:06:05,760 --> 00:06:10,119
Speaker 1: global head of Foreign Exchange Strategy for Associate General, joining

115
00:06:10,200 --> 00:06:11,920
Speaker 1: US from London. This is Bloomberg