Hello everyone,
As you know, I’ve been concerned about the British situation for some time, both for the GILT and the exchange rate. The monthly charts suggest that the situation is about to reach a certain point: an increase in the rate of deterioration, which could push GILT above 5.5% and the exchange rate to parity with the euro.
I know, these are extremely ambitious and, in some cases, unthinkable targets, but after so many years, I can say that reality often surpasses fantasy. And, in any case, it’s not a given. If it doesn’t, we’ll have graphical indications that will allow us to understand if a reversal will occur.
The monthly GILT return targets are 6.059% before and 6.62% after.
Looking at the EURGBP monthly chart, it is spiking even higher than the GILT today and the target here is as high as 1,10 to the euro.
Those are the EPAs (Estimated Price on Arrival). For the ETAs (Estimated Time on Arrival) if the angle of increase is similar to the one that took place on 2015-2016, well the ETA is June 2026 from sometime further down than current time.
I’m writing this today, July 16, 2025.
A gentleman I met in Valencia a few weeks ago said something very interesting about technical analysis: “Technical analysis of today explains fundamentals of tomorrow.” I may be biased, but I find it very apt.
UK inflation data was released earlier today, higher than expected, undermining the BoE’s ability to lower rates; indeed, it will likely have to raise them, further complicating the UK’s fiscal situation.
Things aren’t much better elsewhere, with France proposing to abolish Easter Monday as a holiday to try to stem the fiscal problem (shall we look at the monthly OAT chart?)
https://www.ansa.it/sito/
But let’s stay on this side of the Channel. Right now, all UK yields are rising, even significantly, and the worrying thing is that the short end is rising more than the long end, a sign of real concern.
There’s a lot of noise right now, but looking at the monthly chart, nothing exceptional is happening yet, so let’s keep the real concern for future events that will likely occur (within) the next six months.
As I pointed out in the May outlook, every time the GILT peaked, that month the British Prime Minister of the day went to Kiev, and the last time the brave men went to Kiev, it was a pivotal moment for the GILT and the BUND.
I note, as a “pure coincidence,” that Trump decided to bomb Iran after June 16th and not before, because the Fed’s rate decision was expected on June 16th.
Am I a conspiracy theorist? We’ll soon find out, I’m afraid.
Have a good day.
Francesco Maggioni
