The Son of Finance of the Great Age

  Chapter 95 The British pound has collapsed (1)

  Compared to the era before Zhongshi's rebirth, the current historical trend has been slightly different.

In the original version, after reading the report from the Wall Street Journal, the Quantum Fund began to aggressively sell the British pound in the foreign exchange market, and bet a heavy position on another strong currency, the Mark, to make huge profits by taking advantage of the depreciation of the British pound and the appreciation of the Mark. , It is said that a short position in GBP worth 8 billion U.S. dollars has been established, and a long position in Mark close to 7 billion U.S. dollars has been established on the other side.

   Zhongshi’s one-step quicker response made the price of the pound sterling fall faster than before in the foreign exchange market, which also made it more difficult for Soros to sell the pound, and the size of the position he opened became much smaller.

  Most of the major commercial banks trade in the foreign exchange market. The foreign exchange trading departments of these banks often have a transaction volume of hundreds of millions of dollars, making use of every tiny price change for profit. The smallest unit of change in the foreign exchange market is 0.0001, referred to as a basis point.

  The fluctuation of the price of the British pound in the foreign exchange market quickly attracted the attention of other traders and hedge funds. After a little analysis, they quickly joined the camp of shorting the British pound. The price of the pound plummeted, and soon approached the lower limit of 2.7780 (to the mark) stipulated by the European Exchange Rate System.

   There will soon be no buyers in the market, and everyone understands that the depreciation of the pound is imperative. At the tipping point of 2.7780, there is only one buyer left in the market, and that is the Bank of England.

At 3:30 in the middle of the night in New York, that is, 8:30 in London time, on September 16th, the managers and traders of Wall Street hedge funds who had placed huge bets on the British pound could not care about the overnight hours of the past few days, and still turned on the lights. Look for buyers in the market in brightly lit offices.

  The Bank of England has made a move!

Before the opening of the market, the Bank of England intervened twice, spending a total of 600 million pounds worth of foreign exchange reserves to buy pounds in the market, but it had no effect on the surging selling orders in the market. A bigger sell order.

   "I want to sell one billion pounds!" Druckenmiller in New York loudly gave orders to traders.

   "One billion?" The young trader trembled and almost dropped the microphone in his hand. For him, such a figure was bigger than any transaction he had ever done before, but his good professionalism made him place a sell order immediately after he was stunned for a moment.

  When the billion-pound sell order appeared on the trading screen, those traders who were still hesitating whether to continue shorting the pound immediately followed suit and once again threw out sell orders of varying amounts, which once again increased the pressure on the pound.

In fact, in the free-floating British pound and U.S. dollar market, the pound has fallen for five consecutive trading days, a drop of more than 7.5 percent. Excluding the pound sold last night, Zhongshi has made a profit in the foreign exchange market. A profit of more than five percent was taken.

   "2.7790...this is an important threshold!" Zhong Shi, who had a good sleep, stood in front of the display screen in the trading room, rubbing his chin and muttering to himself.

  He sold about US$2 billion worth of British pounds at the lower limit price of 2.7780 in the middle of the night yesterday. Logically speaking, this is not a reasonable price, because the exchange rate at that time did not fall to this level. According to the real-time exchange rate, the pound was still above this price, so it was quickly taken over by arbitrage capital.

   Now that his position has been fully established, the next step is to wait for the pound to depreciate, so he can look at this matter with a detached attitude.

   "It was broken so soon?" When Zhong Shi went to get a cup of coffee, the important barrier of 2.7790 was broken, and the pound fell below this price, and the immediate price was 2.7788.

  The seemingly inconspicuous two basis points are behind countless funds. The Bank of England continues to buy in the market to keep prices from falling to the bottom line.

  At 8:40, the price of the British pound reached another important threshold of 2.7785, which is regarded as the second line of defense, only five basis points away from 2.7780.

   "Buy! Keep buying!"

   Pemberton shouted loudly in the Bank of England, his eyes were already a little red, and his voice was a little hysterical. At the same time, he grabbed the phone and dialed the dedicated line to the office of Chancellor Lamont.

   "It's almost overwhelmed, think of a way!" the Bank of England governor shouted on the phone without grace.

He understands that once the pound reaches its lowest point, there will not be any other buyers in the market, and perhaps at other prices, there will be commercial banks buying, because they know that the lower point is 2.7780 At this price, the Bank of England will buy, so that they can earn the relevant exchange difference.

  So far, they have used more than three billion pounds of foreign exchange reserves, but the pound is still falling, and the quotations are getting lower and lower.

   "Hold on, I will report to the Prime Minister and ask for an increase in interest rates." It hadn't been long before Lamont arrived in the office, and the seats were not even warmed up. Bad news came one after another.

  He couldn't help thinking about the idea that had crossed his mind yesterday, that the UK might introduce the European Exchange Rate System. At that time, the idea was only fleeting, but now it is about to become a reality.

   But before he had time to call the prime minister's residence, the Bank of England called again. The price of 2.7785 has fallen, and the exchange rate of the British pound against the mark will soon fall to the lower limit of the European exchange rate system.

   Speculative funds sold and bought crazily in the two markets. On the one hand, they bought the mark to force its appreciation, and on the other hand, they sold the British pound aggressively, making its depreciation continue to intensify.

   These speculators are very clear that the European exchange rate system linked to the pound is essentially the exchange rate against the mark, because Germany occupies the largest share in the European exchange rate system.

   "Ask other central banks for advice immediately, hoping that they can intervene in the foreign exchange market!" Lamont couldn't sit still, and he personally called Schlesinger, the president of the Bundesbank.

  According to international diplomatic practice, the Minister of Finance of England corresponds to the Minister of Finance of Germany. If the central bank of the other party is required to take action, then the corresponding counterpart is the Governor of the Bank of England. But at this time, Lamont couldn't care so much. The moment he dialed the phone, he immediately asked: "Mr. Schlesinger, the situation is critical now, and I hope you can continue to reduce Germany's interest rates to maintain the British economy. able to remain in the European Monetary System."

   Obviously, such a request would be rude and unlikely. Schlesinger in the microphone coldly rejected Lamont's request, but in return, he promised to intervene in the appreciation of the mark in the foreign exchange market, and at the same time sent an emergency foreign exchange aid of tens of billions of dollars to the Bank of England.

  Hung up the phone, Lamont was full of resentment, but he knew that now was not the time to attack, and the most urgent task now was to ask the Prime Minister to raise interest rates.

When the offensive and defensive battles were in full swing in the foreign exchange market, Lamont called the prime minister's office before nine o'clock. During the phone call, he carefully analyzed the current situation, and finally strongly It is recommended that the Prime Minister raise interest rates at this time to stimulate the return of foreign capital.

   But what made him doubly shocked and frustrated was that Prime Minister Major turned down the request.

As the leader of the Conservative Party and the Prime Minister of the United Kingdom, Major’s considerations are not limited to economics. As a policy maker and implementer who introduced the United Kingdom into the exchange rate system, he is worried that the collapse of the pound will affect his reputation, which will make the prime minister’s Status is being challenged by various other members, so he refuses to raise rates.

   On the phone, Major told Lamont that last month's economic data will be released later today, which is believed to bring improvement to the market.

   Lamont, who put down the phone, was furious, but there was nothing he could do. Only the prime minister could make the decision to raise interest rates. What he can do now is to continue to buy sterling in the market to keep the price of sterling above 2.7780.

   "Am I selling a little early?"

  Looking at the numbers constantly flashing on the electronic screen, Zhong Shi yawned a lot, feeling quite annoyed.

If yesterday, he sold the British pound at the price of 2.7781, and waited until this time to buy it at the price of 2.7780, then he made a profit of 0.0001 between one exit and one entry. Counting the huge position, it would be hundreds of thousands of pounds access.

  In fact, there are many traders who do this in the market, and every basis point fluctuation in the foreign exchange market contains huge profits, but the momentum of the buyer is too fierce now, which shows the weakness of the seller.

The traders of the Bank of England are naturally aware of this, so they are desperate to keep the price of the pound above 2.7780. At the price of 2.7780, they are the only ones left in the entire market.

   "2.7782" "2.7781"...

  Zhong Shi was bored counting numbers one after another, just waiting for that historic moment to arrive.

  Around ten o'clock in the morning, the number finally stayed at the price of 2.7780. Since then, there has been no fluctuation at all, and it has become a straight line without any room for arbitrage.

   HSBC's foreign exchange trading room suddenly burst into cheers, and almost all traders were shouting, the moment they were waiting for finally came. There are also a very small number of traders holding their heads in frustration, cursing something in their mouths, it seems that they are trapped in the price.

   "Is it finally here?"

  Zhong Shi stroked his smooth chin, and muttered to himself a little bit. Beside him, Andrew was already snoring on the sofa without any image, completely unaware of what happened.

   At the same time, there was a wailing in the Bank of England, and all traders knew that they were going to fight alone from now on. (There are only two days left for Sanjiang’s recommendation. I hope everyone will continue to work hard and give full support in these two days. I hope this book can make further progress. I hope that friends who like this book can take action. Thank you~)

  (end of this chapter)