Although the current market news generally still favors the bullish direction, and the Bank of England is clearly increasing its intervention in the foreign exchange market.
However, the trend of the GBP exchange rate on the trading floor not meeting expectations is a fact.
Years of market trading have taught Andrea to respect the market while being confident in her trading choices.
Although the market's news and sentiment aspects are still dominated by bullish sentiment, the trend is becoming increasingly weak.
In her view, this can only indicate that the potential bullish power in the market is declining, and that the combined strength of the market's bullish forces is weakening, while the corresponding divergence is growing, and there are already signs of a shift towards a bearish direction.
"According to the latest intelligence feedback from our marketing department..." Hearing Andrea's question, Evangeline, the market intelligence officer for 'UBS International Andrea Hedge Fund's' main fund product, replied, "Barclays Bank Leon International Hedge Fund's trading department is indeed continuing to increase its short positions in the GBP exchange rate."
"Is Claude...crazy?" exclaimed Enid, the Head of Market Analysis. "Shorting your own country's currency exchange rate and standing against the Bank of England, what good does that do for their institution? If the GBP exchange rate collapses, their institution's exchange and investment businesses will also suffer huge losses. If the GBP exchange rate experiences extreme appreciation, then their large-scale shorting of the GBP exchange rate will also result in huge losses. In short...shorting the GBP exchange rate, no matter how you look at it, is a very foolish investment strategy!"
"I think so too," Evangeline said. "And it's not just financial losses; 'Barclays Bank Leon International Hedge Fund' doing this also creates immense public pressure. I really don't know what Claude is thinking, to actually stand with Wall Street capital."
"However, if Barclays Bank's reputation collapses, it would be a huge opportunity for our institution's business development in the UK," Enid thought for a moment and said. "No matter how you look at it, I always feel that Claude is somewhat reaping what he sows."
"Historically, the 'Barclays Bank Leon International Hedge Fund' products managed by Claude have always been known for steady investments..." Evangeline said, still not quite understanding. "I really don't know why he would choose to massively short the GBP exchange rate at this time."
"Besides the news that 'Barclays Bank Leon International Hedge Fund' is still shorting," Andrea pondered for a moment and continued to ask, "are there any other important developments in the current market? From the Bank of England, regarding tomorrow's referendum vote counting results, the UK government's internal opinions on Brexit or not... are there any major changes in these various pieces of news?"
Evangeline continued to reply, "As far as I know, there are no major changes in the news."
"That's truly strange," Andrea frowned deeply. "Why would the bearish forces in the market increase so sharply?"
"Could it be that the numerous Wall Street capital institutions and Chinese capital institutions trapped in the market are making a desperate counterattack, hoping to force many unconfident bulls to cover their positions through extreme market suppression before tomorrow's referendum results are released, thus allowing them to close their positions without losses and exit?" Enid pondered for a moment and said, "Overall, this is the only logical explanation for the weak performance of the GBP exchange rate."
"However..." Evangeline, while Andrea was frowning deeply, pondered carefully for a moment before continuing, "It seems that in the global foreign exchange black market, outside of the official market, the GBP exchange rate is somewhat collapsing. Many investment companies and trading companies worldwide are massively selling their GBP holdings, wanting to convert them into US dollars, which have higher certainty, and spot gold."
"What's the current level of the GBP exchange rate in the black market?" Andrea asked urgently.
Evangeline shook her head and quickly turned to call other intelligence officers in the market intelligence department.
Then, about ten minutes passed.
The intelligence officers from the market intelligence department quickly responded.
"The GBP exchange rate for most black market institutions has fallen to around 1.4600 points," Evangeline said. "Furthermore, institutional groups worldwide that hold a relatively large amount of GBP currency also seem to be selling GBP in the black market, and among them are well-known Wall Street capital institutions."
"Well-known Wall Street capital institutions?" Andrea asked urgently, "Who are you referring to?"
Evangeline said, "It's BNY Mellon, and Japan's Nomura Bank. And, I heard that both BNY Mellon and Citibank have currently relatively restricted clients from using GBP for large-scale concentrated conversion to US dollars, or for direct purchase of spot gold with GBP in exchange transactions."
"As expected, these guys... unable to suppress the market and gain the upper hand in the open trading market, they resorted to these off-market tactics," Andrea sneered and said. "I really didn't expect the black market GBP exchange rate to have fallen to 1.4600. No wonder the GBP exchange rate is under such pressure in the open trading market, and no wonder the combined strength of the bears on the market is getting stronger."
"By restricting clients from using GBP for large-scale concentrated conversion to US dollars and spot gold, they create market panic to sell GBP, thereby forcing large amounts of GBP funds into black market transactions. Then, these Wall Street capitals intentionally depress the black market GBP exchange rate by selling some GBP in the black market..." Enid mused, "Finally, they use the lowered black market GBP exchange rate to influence the GBP exchange rate in the open market, thereby enabling their massive short positions in the GBP exchange rate market to achieve huge profits. This trading strategy... I must say, it's truly ingenious!"
"The most fundamental reason this trading strategy can be achieved is that tomorrow's referendum is bound to cause extreme fluctuations in the GBP exchange rate. Numerous financial institutions, investment companies, multinational trading companies, and other holders of large amounts of GBP globally have a strong desire to avoid risk and sell GBP, which has led to the current market trend, hasn't it?" Evangeline thought for a moment and said, "I think Claude, the manager of 'Barclays Bank Leon International Hedge Fund', must have also seen this, which is why he decisively made the investment decision to heavily short the GBP exchange rate."
"How much US dollar foreign exchange reserves did the Bank of England inject into the market yesterday and recently?" Andrea, after clarifying the underlying logic of the current weak market trend, did not rush to make a decision but continued to ask.
Evangeline replied, "According to our estimate, the US dollar foreign exchange reserves injected into the market by the Bank of England over the past week or so amount to approximately 30 billion US dollars."
"Alas, it's too little," Andrea's brow furrowed even deeper. "Brian is always too conservative in his determination to maintain the exchange rate market, no wonder he's being led by the nose by Wall Street capital."
"An injection of 30 billion US dollars... that should be quite a lot, right?" Enid said. "Considering the Bank of England's past market operations, this is already a fairly aggressive scale of injection."
Andrea said, "If it were during ordinary times when Wall Street capital was collectively shorting, this amount injected by the Bank of England would naturally be entirely sufficient to maintain market exchange rate stability. But what time is it now? It's the critical juncture of a national referendum on Brexit.
Active capital worldwide is concentrated in the GBP exchange rate market.
Countless financial institutions are involved.
In fact, this national Brexit referendum is an extremely important historical event that will determine the future destiny of the UK and even the direction of global economic expectations.
At such a critical moment, with active speculative and investment capital worldwide participating fully.
With countless institutions having the desire to avoid uncertain risks and sell GBP.
The more than 30 billion US dollars released by the Bank of England naturally seems scarce, which explains why there is such a large difference between the black market exchange rate and the open market exchange rate.
It is estimated that it's not just BNY Mellon and Nomura Bank that are unable to use GBP for large-scale concentrated conversion to US dollars and spot gold; many financial institutions worldwide, facing the nearly collapsing GBP exchange rate in the black market, and facing countless institutions, businesses, and individuals scrambling to sell GBP, will also quickly react similarly to BNY Mellon and Nomura Bank."
"If financial institutions worldwide follow suit and restrict GBP-related exchange transactions... that would truly be terrible," Enid's heart skipped a beat. "This would further force funds into black market trading, further depress black market exchange rates, thereby putting even more pressure on the GBP exchange rate in the open market, and simultaneously triggering an even greater desire to sell, and even panic, among countless institutions, businesses, and individuals holding GBP worldwide.
And once this sentiment spreads...
Even if the Bank of England reacts by injecting a larger amount of foreign exchange reserves, it would likely be difficult to reverse this situation of panic selling GBP in the short term."
"Hearing you say this... are the bulls in the market in danger?" Evangeline's expression also became serious at this moment.
Andrea let out a long sigh and said helplessly, "It's not just danger; they're practically on the edge of a cliff, and the downward trend has already formed, making it very difficult to reverse."
"But aren't the central bank's monetary policies and intervention in the foreign exchange market still positive?" Evangeline asked. "And isn't the expected outcome of tomorrow's referendum, supported by initial vote counts, also clearly leaning towards the desired outcome of remaining in the EU?"
"The underlying logic supporting the bullish stance hasn't changed, but..." Andrea sighed softly, lamenting, "In the global market, the vast majority of people, especially those foreign trade companies, retail investors, speculative capital groups, and millions of ordinary people holding GBP with little discerning ability, they don't have such deep understanding.
And it is precisely these groups that are most easily swayed by emotions, most easily swept up by sentiment, and prone to following the crowd in their operations and judgments.
In other words...
In the market-driven foreign exchange market.
What ultimately determines the true direction of exchange rates is sometimes not the central bank, but the combined force of all capital.
As it stands, it is clear that the Bank of England's market intervention has somewhat failed, and the combined force of all capital in the market, influenced by the black market exchange rate collapse sentiment, and with countless people worldwide selling GBP en masse to avoid uncertain risks, has clearly shifted towards a bearish direction.
If in the next few hours.
The Bank of England and its affiliated financial institutions cannot make a strong response and decisively inject larger-scale foreign exchange reserves into the market.
Then, the bullish and bearish forces on the trading floor, as well as those in the actual off-market trading.
Will certainly become even more imbalanced."
"So... are our institutions also going to switch from long to short?" Enid asked, staring intently into Andrea's eyes.
Andrea turned her head to glance at the massive long positions summarized on the fund's main control computer interface, as well as the GBP exchange rate that continued to fall, having already broken through the 1.5160 point, gritted her teeth, and said, "To avoid extreme risks, our institution has no choice but to switch from long to short."
"But with such a large position, it won't be easy to cover and close out," Enid said. "Once we close positions in a concentrated manner, it will inevitably attract the attention of various major bearish institutions in the market. At that time, these institutions will accelerate selling, and the bullish buying power in the market will be rapidly devoured, also triggering a stampede among the bulls in the market."
"I know it won't be easy, but we must do it," Andrea said with sharp eyes, having made up her mind. "Brian lacks the courage; we cannot bet the future of such a large position on the Bank of England making immediate and correct market operations. And if we miss this current excellent opportunity to reduce positions and cover, by the time the bullish buying power in the market further sharpens, we'll truly be trapped and unable to get out. While the overall position loss is not large now, and many bullish institutions in the market have not yet reacted, decisively reducing some positions to avoid extreme risks is completely timely."
"Alright!" Enid sighed, reluctantly agreeing to Andrea's investment decision.
Subsequently, Andrea immediately issued trading instructions to the various trading teams in the trading room to quickly close positions and cover, and to rapidly reduce long positions.
And with UBS International's massive stop-loss reduction.
In the GBP exchange rate market, the GBP exchange rate once again experienced a sharp dive.
At 5:10 PM Beijing time, under the watchful eyes of countless investors, speculators, major bullish and bearish institutions, and even central banks worldwide.
The GBP exchange rate fell below 1.5100 points.
It hit a new recent low, completely breaking through the previous oscillation range platform of 1.5200 to 1.5400 points.
And at the same time...
Under pressure from countless investors, multinational trading companies, and ordinary individuals worldwide, who were panic selling GBP, almost creating a run on other more stable mainstream currencies and spot gold.
Numerous multinational banks and foreign exchange financial institutions with exchange businesses worldwide.
All began to relatively restrict clients' concentrated large-scale foreign exchange operations.
It was only then, when the trend of global capital panic-selling GBP had formed, that the Bank of England truly realized the seriousness of the situation and the ferocity of the bearish capital in the market.
(End of chapter)