 I will talk about, I guess, I made a video a minute earlier, so I won't necessarily speak on it too much, but basically I was saying short the pound or my bias was to short the pound. And for those of you that may have missed it was the fact that fundamentally we know, what we know to be true is this, is that inflation rises, if that's inflation, then central banks will typically high crates, so they will high crates. Now, hiking rates is again, and I use the word typically and usually, because it's not necessarily always set in stone. There are reasons why some typical fundamentals don't necessarily have the desired effect on a currency's appreciation or depreciation. And this is one of those scenarios. And so because we have to understand that GDP, yeah, GDP is a factor in the ability for the central bank to kind of hike rates or a hike in rates has to be supported by rising GDP, right? A growing economy, yeah? So inflation puts pressure. So remember we've got the 2% target, yeah? So inflation puts pressure on the central bank to hike rates, but also you have to have a growing economy to be able to support the growth rate. A growing economy to be able to support those hikes, yeah? And one of the difficulties and the conundrums that central banks have, yeah, in stagflation for any of you and all of you that have done the short course and test and answering the questions, is the fact that stagflation is very, very, very difficult to, I guess, navigate for this very reason, right? Because in stagflation, you have rising inflation but you have, I guess, contracting GDP, right? So what is the central bank to focus on? Do they focus on inflation, yeah? Or do they focus on GDP? What would you focus on, right? If you don't hike rates, yeah? If you're looking to hike, hold or cut, right? The question is if you're hike, holding or cutting, yeah? What are the consequences for, let's say, I would say cutting is definitely out of the question. So let's say the two options that central banks generally have, yeah? Holding or hiking. So let's start with holding rates. If they hold rates, yeah? What does that do to, what do you think would happen to inflation if they hold rates? Would inflation go higher? Do you think inflation would go higher? Or do you reckon it would, so Mr. Dilligan says inflation would get out of control. Marianne says higher inflation. Higher, yeah, yeah, pretty much everyone's on the money, right? And because obviously if inflation is above their 2% target and they're not doing anything about it, generally you should see inflation go higher, right? So what is the effect of higher inflation? What are you seeing right now when it comes to the economy, wherever you're living in the world? Because I think a few people were speaking about this yesterday in the group and when it comes to prices. So let's just talk about living standards. Currently wherever you are in the world, there's a cost of living, I guess if you wanna call it a crisis, but energies up, petals up, business and borrowing and lending costs are up. Everything is more expensive, right? If inflation is 9% at the moment in the UK, things cost 9% more than they did last year. Right? So from that perspective, from that perspective, there's an issue there, right? When it comes to inflation and the direct effect that that has on, for example, a growing economy is gonna be the fact that people are gonna have less money in their pockets to spend, which then affects businesses, right? And slower growth, that's exactly it, Mr. Diligent. So Mr. Diligent says people have less money to spend in slower growth in the economy. Yeah, and because they're not gonna affect this, people aren't gonna take as many chances, right? People aren't gonna spend, and let me say chances, I'm talking about, people are not gonna necessarily invest in things, they're rather just play safe, think about yourself. Have you got money to start putting into the stock market, for example, right? You would rather spend the money on shopping and food and travel, right? You haven't got enough money to save you, but not necessarily you in particular, but people generally wouldn't, we're gonna go on less holidays, right? So that's gonna affect tourism. People have got less money to spend on things like clothes and things like that, right? So that's gonna affect retail. So it's affecting businesses directly, which then has a negative effect on GDP, yeah? So that's what happens if a central bank doesn't hike rates or looks to hold rates, right? Inflation goes out of control, it directly affects GDP. And so what you'll end up having is it might be start exacerbating GDP to the point where it might accelerate the downturn, right? If you don't. So then now let's look at, for example, what happens if they hike rates, yeah? So if they hike rates, what should happen to inflation? Should inflation go higher or should wanna go down? In theory, yeah, in theory. It should go down in theory, right? Correct. Right, it doesn't go down straight away, of course. Nobody knows when exactly it's going to come down. Everyone has forecasts and projections. And remember, the central banks only try to control inflation through monetary policies like hiking, holding, and cutting, right? And then it takes its time to work its way through the data, right? So they have to try to look at both. They're looking at inflation and looking at GDP. And then they're saying to themselves, all right, what's the bigger threat at the moment? So they look at the GDP numbers and they'll say, okay, well, GDP is at where at least positive, right? When it comes to potential growth, yeah? We're in a positive territory because two negative quarters would be classes of recession. So we haven't got a negative quarter at the moment. So with that, it's the lesser of two evils. So rather than either holding, yeah, and maybe trying to manage the economy, right? And hopefully give people a chance by not making things too expensive, but they run the risk of higher inflation or hiking, yeah, trying to drive down inflation, but the knock-on effect we're doing that is also, when you think about it is hurting or maybe compiling or piling pressure on an already potentially struggling economy, right? Because what then tends to happen is what? If you're a mortgage owner or you're a business owner, right? And you already, inflation is already at, let's say, for example, 9%, yeah? So your cost of living is coming down. On top of that, yeah? You have rising costs, rising borrowing costs. So if you're getting, if you've got a variable mortgage and the Bank of England are hiking rates, even if it is by maybe 0.25%, yeah? That could be a lot of money, yeah? For anyone who has a mortgage, and especially it might be, I don't know, depending on the size of your mortgage or whatever it is, that could be anywhere from 50 pound to 200 pound, 300 pound, who knows, right? But that's less money in your pocket. And imagine they're doing that every statement. So every three months, you're finding out that your mortgage is getting more and more and more expensive. Yeah? So then that, again, exacerbates the cost of living crisis, right? So you've got a double whammy of rising borrowing and lending costs, yeah? As well as inflation. So again, as a central bank, what do you do? If you're a central banker and you're already in the country, what is the lesser of two evils? Holding rates, yeah? Or what's the bigger threat? So actually now, I'll go back to the original question. So what do you think is the best scenario, the best, what would you do in that scenario? Would you agree with what the bank's doing in hiking rates, or do you think that holding rates should have been the way to go? Is the diligence has increased rates? Anyone else? Marianne Sithaik? Yeah, it is a losing battle. This is exactly it. And if you look at the definition, you know, of stagflation, right? Stagflation, right? Stagflation is characterized by a slow economic growth and relatively high unemployment or economic stagnation, which is the same time a company by rising and then there was, right. So here's the definition I wanted to find. So in economics, stagflation or recession, inflation is a situation in which inflation rate is high. The economic growth rate slows and unemployment remains steadily high. It presents a dilemma for economic policy, right? That is the key. It's a dilemma, yeah? It's a dilemma, right? So Daniel says, increase rates if GDP can handle it. And that's exactly what they're doing, Daniel, right? That's the reason why. Because at the moment, if you're looking at GDP, it's still in the positive. Yes, it might be trending down, et cetera, but the fact that it's in the positive at the moment means that they're just all saying, do you know what, it's better that we try and hike now, yeah, and try to get inflation down because then by the time a recession does come, if a recession does come, yeah, then at least we would have got inflation down. Because the worst thing you wanna have is a recession, right, and inflation is way, you know, oh, son, it's again. And a recession is way, is high. Because I don't know what you would wanna call that, right? Inflation is still at 9% or 10% and rising, but yet you're in a recession, that is just probably the worst scenario you could possibly be in, yeah? Worst scenario to be in. Now, I say all that, yeah, to go on to, you know, the fact that all central banks at the moment are pretty much in this scenario to varying degrees, yeah? To varying degrees. Some are worse than others. Some have better GDP than others, yeah? And some don't. Some have higher inflation than others, yeah? So everyone's in the same scenario because there's potentially a global recession. But when it comes to deciding which is the dog with the least fleas, yeah? That's ultimately what we're trying to do in currency land, yeah? We're trying to see the differences and the divergences and to, again, to keep it really, really simple. Who's the best? Who is the best of the worst, yeah? Who is the best of the worst? And one of the currencies that I thought was, you know, is a sell, yeah, is the Great British Pound, GBP, yeah? That is pretty much one of my sell trades. Now, again, you know, it's just a trade idea, right? It's a trade idea. I don't know whether this is going to, but if I'm looking at the pound and I'm looking at the issues that they have, yeah? The issues that they have in comparison to, you know, some other currencies, like for example, the dollar, you know, like for example, Canada, yeah? The pound is the worst off out of those two. Are they the worst? No, but for me, they're one of the two. And one of the things that really, I would say solidifies this is one second, right? Sorry, right? So in the UK channel, right? Which is basically, if you want to know about how well, you know, the UK is doing or whether you should be a buyer or seller, one of the things you should be doing is reading up about, you know, what's happening in the economy, right? This is, you know, our research. And one of the things, one of the videos that came out, which was quite interesting was, in fact, the Bank of England to do less due to weak economy and this was from more than Stanley. And pretty much it echoes really what I was thinking myself. And it's because, and let me just explain this quickly, is because, and you'll hear it from them, is that they can't hike as much, yeah? If they are facing a downturn, right? So generally when you're on a, when you're hiking rates, you generally, what's known as a hiking cycle. And a hiking cycle can last for, you know, months and even, you know, a year or two, yeah? So central banks generally don't just hike once, they hike, you know, three, four, five, six, seven times, eight times, et cetera, right? Depending on how, what happens with inflation. Now, when you have a scenario where inflation is a, you know, 9% for example, very, very high. Obviously you're looking for that 2% target. But GDP, right? As I said, you know, if you're hiking rates, the hikes have to be able to, you know, the economy has to be able to support hikes. The problem is, is that if you hike too aggressively, it could send your economy into a recession quicker, yeah? Because it's compounding the economic effects that come with rising borrowing costs and rising inflation at the same time, yeah? So the Bank of England are very, very aware of this. So they don't wanna hike too much because, again, as I said, they could compound the problems of the economy, yeah? So that was my thinking, going into the fact that, you know, we had rising inflation, but the pound I was saying was still a sell, yeah? Welcome, Jarbred, by the way. Is Jarbred still in here? Yeah, Jarbred, welcome. Since blessings. Yeah, right? So the reason why I was also short on this was because I understood that the Bank of England have a massive headache on their hands, yeah? Because they don't want to kill the economy before it's actually got started, yeah? And although, as we know, generally, hikes, yeah? Rate hikes are generally positive for a currency in this scenario, in this scenario, in fact, sorry, rising inflation, right, which leads to hikes is positive. In this scenario, it's not so much because of the effects that hikes are going to have on GDP, yeah? So it's really, really important that you understand the relationship between all three. Everything else is just, you know, leads to this scenario. So whether you're watching retail, whether you're watching home builders, whether you're watching wage growth, you know, whatever, right, it all leads back to these, the relationship between these three. So, and again, as I was saying, what typically happens, yep, that would, you know, tend to typically appreciate a currency, yeah? But because rate hikes at this moment in time are probably hurting GDP and the Bank of England know this, the Bank of England are basically saying now, in fact, we probably may not be able to hike as much as we want to hike, because if we do hike and hike too much, too aggressively, we're gonna go into a recession quicker, yeah? So if you go back to the UK channel, go back to the UK channel, again, the headline is Bank of England to do less due to weak UK economy, right? And it's only a minute long, but I'll play this for you. Yeah, I'll play it, try and play it loud. There are a lot of focus on the Bank of England this week because there's a lot of data coming out on the UK today. They've had labor markets more as CPI and the market seems to be pricing in more rate hikes this morning than they were just yesterday because of the strength of the labor market. And what did you make about narrative? Right, so again, everything we've spoken about because of high inflation, the market is, they're saying that the market is pricing in those potential hikes because the theory goes and what we would typically see is higher inflation should lead to more rate hikes, yeah? That's what typically happens. But again, the headline being a weak economy, you'll start to see and understand, and as I've explained as well, why in fact Morgan Stanley are actually taking the other side of that trade, which is this. Yeah, so we have a different view at Morgan Stanley. We think the Bank of England is ultimately gonna do less on the hiking side because the economy will ultimately be weaker. So today's data doesn't fit that narrative as maybe well as we would have liked, but it's just one data point and we do think UK consumers are still being hit with a very significant cost of living increase. You still have some major uncertainties around trade and the evolution of Brexit and you still have some energy uncertainty. So we think all of that will ultimately drive a weaker consumer backdrop in the UK, which will ultimately mean the Bank of England does not hike as much as the market currently expects. There you are, right? There you are. Now, who am I, right? I'm just Leon Rowe here in, I mean, in my home telling you what my theory is, right? I'm not the smart, it's sort of smart, you know. Yeah, but you are Ambassador of Kwan. Tell me the money, man, come on. Right, and this is just one trade idea, right? I could be wrong about this and also as well, there is market timing, right? Because sometimes you're gonna have a trade idea. Many times we have trade ideas that don't necessarily play out when we want them to because timing is a very important part of our trading, right? Because we're trying to time highs and time lows. So we're trying to time turning points. But, you know, my opinion on the pound is that it has further to fall. And again, if you look through, you know, cut through the, I guess the headlines and understand, for example, you know, some of the quotes that we're seeing and even from the Bank of England themselves, right? Talking about, you know, significant shocks. So the Bank of England governor, Andrew Bailey reiterated that those risks when told UK lawmakers on Monday, a significant income shock was playing out in the UK, which would ultimately push up unemployment, right? So that's yet to happen. But these are the smart of the smart guys. These are the smartest guys in the room, right? And it's, again, you see here, right? So markets are still pricing in a strong degree of tightening in the UK even after Bank of England flagged increasing risks of a recession in its MPC meeting and its last MPC meeting, right? So the Bank of England are saying basically what I'm saying here. Yeah, the risk of a recession increases as faster the more hikes you do. But they have the problem of, you know, I mean, what do they do with inflation? Because if, you know, if interest rates are at, what's the Bank of England interest rates at the moment? Is it 1% something like that? I think, is it 1% guys? If it was at 1%, let's say, right? But that isn't an inflation is still going higher. Then the conundrum is that, okay, what do they do? Do they hold rates? Or do they still continue to high crates and potentially compound recession or bring the recession forward? This is the headache. This is the problem that they have. Now, it's our problem as well, but it's our job as traders is how do we make money from this? How do we make money from this trade idea? Yeah, do you buy the pound? Yeah, do you buy the pound based off of rate hikes? Or do you, you know, continued rate hikes and what the market is potentially pricing in until it doesn't? Or do you maybe try to get ahead of the story and risk maybe being maybe a few steps ahead and maybe, you know, having to miss time the market at certain levels. So one second, right? Because ultimately, what are we doing as traders? Right? What's my approach? My approach is this. Yeah, let's say, for example, I've got short on the pound New Zealand, right? Pound New Zealand, oh, sorry. Right, that's where we are. Now, so what I'm doing, I say this all the time, this is just from a supply and demand perspective. I've already got my bias, so I'm looking to short the pounds. Yeah, so I know that that's the direction I'm planning. Now, because my bias is to the short side, I'm only looking for short trades. Now I have no idea whether, you know, the first trade I take in this trade idea is gonna net me a thousand pips or not, right? I have no idea, yeah? It might not even work out there, right? It might just go down a little bit and I might get stopped out. But ultimately, if I'm right about this trade idea, and even if I'm wrong about this trade idea, there's always gonna be pullbacks to make money from, right? That's, you know, here's what I'm, you know, people think that, you know, if you're wrong about a trade idea that you still can't make money because there's always going to be pullbacks. But the point is, is that if my bias is to the short side, all I'm looking at is taking those types of setups. I mean, I'm taking stop hunts that go in the direction of short trades, yeah? And whether I make money or whether I don't, when I do make money or when the trade idea does play out, then I should hopefully make, you know, 10, 15, 20 to one type trades, right? Or even more hopefully in swing trade these, yeah? So, it's not, it's our job as traders to pick a direction and see where the potential downside is and whether this is, you know, a bargain for the New Zealand dollar, yeah? And whether the market agrees with us or if not, if the market doesn't agree that that's a bargain, then maybe it might be the next level up. It might be the next trade up. But ultimately, if we're right about this trade idea and we can capitalize from it, then we should have lots of downside, you know, potential.