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Borthwick: Shrinking Global Influence Powers GBP Plunge (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg eleven Brio to Washington,
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  Speaker 1: d C. Bloomber to Boston, Bloomberg twelve hundred to San Francisco,
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  Speaker 1: Bloomberg nine to the Country series Exam General one nine
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  Speaker 1: and around the globe the Bloomberg Radio plus Appen Bloomberg
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  Speaker 1: Got Gone. This is taking stock. I'm Caffeine Hayes along
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  Speaker 1: with pim Fox. The focused remains on the UK in
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  Speaker 1: global markets is the pound falls to its weakest level
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  Speaker 1: in three decades against the dollars, even lower than the
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  Speaker 1: hit the lows it hit right after Britain's vote to
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  Speaker 1: leave the European Union was passed. Why is this unsettling
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  Speaker 1: markets because it could hit fragile economy at a time
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  Speaker 1: when the rest of the global economy is fragile as well.
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  Speaker 1: We're gonna look at some of the currency impacts right now,
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  Speaker 1: PIM Yes. So we've got Doug Barthwick, I'm managing director
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  Speaker 1: in the head of foreign Exchange at chap The Lane
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  Speaker 1: and Company. He'll be giving us more details right now.
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  Speaker 1: More details from Catherine Cowtery in the Blomberg newsroom. Thank you,
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  Speaker 1: pamla wall Street. Starting off this holiday shortened week with
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  Speaker 1: a retreat. Bank of England Governor Mark Kearney warned of
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  Speaker 1: prospects for a material slowing of the economy on the
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  Speaker 1: developing risks from Britain's withdrawal from the European Union. Now
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  Speaker 1: banks are taking the largest losses and energy companies are
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  Speaker 1: sinking along with the price of oil. The government said
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  Speaker 1: gasoline supplies on the East Coast reached a record. Jim Paulson,
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  Speaker 1: chief investment strategists at Wells Capital Markets, on one of
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  Speaker 1: the reasons why he thinks the market can reach new
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  Speaker 1: highs over the next few months. I like the fact
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  Speaker 1: that this rally since January has been very broad based.
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  Speaker 1: The equally weighted indices are outperforming overall, which tells you
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  Speaker 1: that a broad array of stocks are doing better than
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  Speaker 1: the market cap weighted I think that suggests that a
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  Speaker 1: number of companies are are experiencing earnings momentum. Again, we
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  Speaker 1: check the markets every fifteen minutes throughout the trading data.
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  Speaker 1: Industrial averages down one eight points three quarters of a
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  Speaker 1: percent rating at seventeen thousand, eight hundred ten, SMP five
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  Speaker 1: founded down nineteen points nine tens of a percent to
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  Speaker 1: two thousand eighty four. Then nastac is down fifty six
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  Speaker 1: points one point two percent to forty eight oh six.
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  Speaker 1: West Texas sent a media Crude Oil down two dollar
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  Speaker 1: thirty two cents of barrel four point seven percent to
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  Speaker 1: forty six sixty seven. Spout Gold is up nineteen dollars
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  Speaker 1: twenty cents agains at thirteen fifty eight twenty ten Your
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  Speaker 1: Treasure thirty seconds with the yield of one point three
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  Speaker 1: seven percent. Among today's top business maker business stories, it
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  Speaker 1: marks a revival for the iconic baker Hostess Brands, the
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  Speaker 1: baker of Twinkies, and Ding Dong's plans to become a
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  Speaker 1: publicly listed company. And now let's get an update of
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  Speaker 1: some of the other stories we're following today on Bloomberg Radio.
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  Speaker 1: Thank you Catherine from the Bloomberg Newsroom. I'm Jil Schneider.
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  Speaker 1: Home Secretary Theresa May has won the first round of
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  Speaker 1: voting in the contest to replace David Cameron as the
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  Speaker 1: next Conservative leader and Prime Minister. Mrs May, who began
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  Speaker 1: the race as the front runner, got one hundred sixty
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  Speaker 1: five votes. Minister Andrea leads Something came in second with
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  Speaker 1: sixty six. Liam Fox Will been eliminated from the race,
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  Speaker 1: coming in last with sixteen votes. The battle against Zica continues.
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  Speaker 1: Virginia Senator Tim Caine said today most mosquitoes stay within
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  Speaker 1: a two yard radius of where they are Borns can
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  Speaker 1: find the spot of the standing water, and you can
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  Speaker 1: wipe out standing water or spray there. In that narrow
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  Speaker 1: geographic zone. You can reduce the density of mosquitoes and
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  Speaker 1: then reduce the incidents of Zeca. Officials say Islamic State
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  Speaker 1: appears to be increasing its attacks as the group loses
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  Speaker 1: territory across the Middle East. Here's Deputy Secretary of State
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  Speaker 1: Anthony Blinken, territory matter is a great deal because what
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  Speaker 1: it does is it's the pole of attraction. It's where
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  Speaker 1: they get their resources by exploiting people within the territory.
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  Speaker 1: They control oil extortion, et cetera. It also is the
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  Speaker 1: poll of attraction for jeehatta surround the world who think
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  Speaker 1: that they see is as succeeding ten feet tall building.
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  Speaker 1: The so called Caliphate authorities now say at least one
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  Speaker 1: hundred seventy five people were killed and almost two hundred
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  Speaker 1: wounded after a truck bombing in Iraq. Islamic State claimed responsibility.
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  Speaker 1: If you watched fireworks in the city last night, you
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  Speaker 1: likely noticed beefed up security. About five thousand nyp D
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  Speaker 1: officers were dispatched to oversee the show, the largest detail
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  Speaker 1: the NYPD has ever assigned. On July four, Global News
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  Speaker 1: twenty four hours a day, powered by more than twenty
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  Speaker 1: six hundred journalists and analysts in more than one hundred
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  Speaker 1: twenty countries. From the Bloomberg Newsroom, I'm Jill Schneider, and
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  Speaker 1: this is Bloomberg Catherine, Thank you. And now let's get
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  Speaker 1: a quick check of the equity benchmarks. Down, Industrial leverage
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  Speaker 1: down one thirty three points at seventeen thousand, eight hundred sixteen,
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  Speaker 1: smp F I foundered down eighteen points at two thousand,
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  Speaker 1: eighty four, nastack down fifty five points at forty eight
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  Speaker 1: oh seven. And that's a Bloomberg business flash. This is
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  Speaker 1: taking Stock with Kathleen Hayes and pimp Box on Bloomberg Radio.
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  Speaker 1: In the aftermath of the Brexit vote, the pound plunge,
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  Speaker 1: global equity markets suffered on's rallying. Things seem to stabilized
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  Speaker 1: for a while, but today, as the head of the
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  Speaker 1: Bank of England, Mark Harney sought to reassure investors that
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  Speaker 1: the Bank of Lincoln is ready to take even more
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  Speaker 1: steps to shore up an economy that will be hit
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  Speaker 1: by the Brexit vote, heading for a recession and more. Uh,
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  Speaker 1: the pound slid again, stocks are under pressure. Where will
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  Speaker 1: this end? And what does it mean as these uh,
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  Speaker 1: these asset classes keep moving so sharply. Let's bring in
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  Speaker 1: Doug Borthwick now. He joins us from Chapter Lene and Co.
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  Speaker 1: Here in New York City where he is a managing
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  Speaker 1: director and head of Foreign exchange. Doug, welcome back, Thank
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  Speaker 1: you very much, nice to be here. So how do
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  Speaker 1: you assess what is going on in the UK and
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  Speaker 1: how it's hitting the pound at this point? Well, going
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  Speaker 1: into this, we we always talked about how this is
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  Speaker 1: a bit of iceberg. I mean, you were the top
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  Speaker 1: side was we always thought that was one fifty In
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  Speaker 1: the downside, we weren't really sure and we've no hit
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  Speaker 1: this one thirty level. I think that it's it's very
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  Speaker 1: good that Theresa May today got the hundred sixty five
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  Speaker 1: votes in the first vote of who's going to be
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  Speaker 1: the next leader. There's further votes in July seventh and twelfth,
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  Speaker 1: and then all party members for the Conservative Party will
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  Speaker 1: vote again for September nine, and that sort of surety
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  Speaker 1: of who's going to be the next leader and who's
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  Speaker 1: going to leave the UK through Brexit. I think it's
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  Speaker 1: very important in the market should adapt to that and
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  Speaker 1: see through that. But as you can see, that's in
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  Speaker 1: two months time. In the meantime, the market today is
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  Speaker 1: really reacting on the back of what Carney said. And
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  Speaker 1: what Carney said is look, Row, it's going to be
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  Speaker 1: lower and we're gonna have to cut rates. So the
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  Speaker 1: expectation is now they'll cut twenty five bases points, so
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  Speaker 1: around a quarter of a percent in August. But on
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  Speaker 1: top of that they also may increase que to five
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  Speaker 1: from three seventy five billions sterling as well. In other words,
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  Speaker 1: the UK's deciety, we're gonna cut rates, we may end
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  Speaker 1: up having to print some more money and that's obviously
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  Speaker 1: negative for sterling. Doug fourth weckome, what if you can
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  Speaker 1: explain why these round numbers like one dollar and thirty
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  Speaker 1: one dollar and fifty how does anyone arrive at those
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  Speaker 1: specific levels? I mean, with a company, you can do valuation.
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  Speaker 1: You can say X number of shares current market value
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  Speaker 1: and then compare that to sales as well as net profit.
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  Speaker 1: But can you do that when you're looking at the
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  Speaker 1: currency market. No, No, it's very much more of a
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  Speaker 1: chart watching a charge as opposed to an actuality. I
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  Speaker 1: think though, when when you looked at the where the
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  Speaker 1: polls were going into the Brexit vote, when we're training
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  Speaker 1: around with that one forty eight and we actually went
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  Speaker 1: up to one fifty, that was when the market has
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  Speaker 1: decided with certainty that the UK was going to stay
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  Speaker 1: within the Union, and that's something that the market very
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  Speaker 1: much had a hold off, which is why we came
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  Speaker 1: out to our clients and said at one eight knows
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  Speaker 1: maybe the time you should be short sterling because it
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  Speaker 1: seems like all the good news is priced in. And
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  Speaker 1: we see that so many times because for example, in
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  Speaker 1: March tenth and the market thought that the ECB would
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  Speaker 1: end up doing further CHEWI and they didn't, and you
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  Speaker 1: saw a huge rally in the euro. You saw the
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  Speaker 1: same thing in sterling as well. So a lot of
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  Speaker 1: the time you find that the market gets very fraughty
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  Speaker 1: and excitative about position when the reality is that the
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  Speaker 1: actually anality hasn't yet happened. So in terms of what
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  Speaker 1: happens next. At some point after such a big, big
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  Speaker 1: drop in the pound, big move up in the dollar
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  Speaker 1: against the pound, you'd say, well, you know, this has
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  Speaker 1: got to be just about it. And of course, as
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  Speaker 1: you mentioned, there are some there are some upsides to
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  Speaker 1: a weaker pound, which Mark Karney mentioned as well. I mean,
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  Speaker 1: to a certain extent it helps exporters, although the they
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  Speaker 1: hit to the to the current account and the cawlow
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  Speaker 1: flows seems to be of a much quicker impact. It
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  Speaker 1: has to be dealt with, and the boon to exporters
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  Speaker 1: seems like a play out over a much longer time.
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  Speaker 1: I think that if you look at sterling an added
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  Speaker 1: to value, you can really think of it as going
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  Speaker 1: from a global nation to isolationism. And when you know,
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  Speaker 1: I think one of the best charts to look at
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  Speaker 1: really is maybe sterling in where in the seventies sterling
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  Speaker 1: in was treating at a nine hundred and I was
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  Speaker 1: treating on two sterling against the ends drop year to date.
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  Speaker 1: This year we're sterling against the dollars when we dropped
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  Speaker 1: by twelve. So the UK as it begins to become
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  Speaker 1: less of a global nation and much more of a
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  Speaker 1: singular isolated nation is just losing the value in Sterling
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  Speaker 1: because fear people really want to be involved with certain
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  Speaker 1: because they don't have to be anymore because the UK
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  Speaker 1: becomes more and more irrelevant than on a daily basis.
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  Speaker 1: I think that that's what we're seeing in this movement
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  Speaker 1: in Sterling today is that Sterling has taken us out
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  Speaker 1: from sort of one of these global leaders with a
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  Speaker 1: huge sphere of influence to becoming one that really is
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  Speaker 1: only going to be managing itself. And if it's only
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  Speaker 1: managing the United Kingdom, it could be that could only
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  Speaker 1: manage that for a year or two before Scotland ends
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  Speaker 1: up leaving, And so you're dealing with the currency now
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  Speaker 1: that is being less used globally and has less sphere
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  Speaker 1: of influence and so is having less of an impact
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  Speaker 1: on the world. Doug Borthwick, Uh, not only is political
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  Speaker 1: news in the United Kingdom dominating headlines, but also in
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  Speaker 1: places such as Australia. I wonder if you give us
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  Speaker 1: your outlook for commodities for currencies that are tied to
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  Speaker 1: commodity producing industries. Certainly Australia is tied to commodity um
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  Speaker 1: in the streetes, but it's also very much tied to China,
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  Speaker 1: and what we're seeing is obviously you seen dollar China rally.
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  Speaker 1: There's been a lot of discussion about how China's devaluing
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  Speaker 1: their currency in the background and no one seeing it.
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  Speaker 1: Certainly China's been devaluing their currency against the yen and
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  Speaker 1: versus the euro or at least uth until lately, but
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  Speaker 1: against the dollar, China's only moved by two percent on
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  Speaker 1: the year. I think that as long as there's weakness
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  Speaker 1: in China, or perceived weakness in China, that will be
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  Speaker 1: perceived weakness in the Australian dollar and in the Kiwi dollar. Obviously,
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  Speaker 1: the Australian dollar is added to by the fact that
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  Speaker 1: there's no clear leader, let in the leader yet in
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  Speaker 1: the general elections, and that's causing heaviness there as well.
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  Speaker 1: Thank you very much. Douglas Borthwick is managing director in
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  Speaker 1: the head of f FX at Chapter Lane and Company,
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  Speaker 1: speaking about the British pound, which currently trades against the
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  Speaker 1: dollar at one thirty in the Japanese Yenna one on
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  Speaker 1: one point five too. This is taking Stockheim pim Fox,
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  Speaker 1: my co host Kathleen Hayes, and this is Bloomberg a
• 11:01
  Speaker 1: brewing Italian banking crisis. This is another important part of
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  Speaker 1: the fallout from the Brexit vote. Will be looking at
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  Speaker 1: that and what it means for the EU broadly. This
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  Speaker 1: is Bloomberg