Rebirth of the Capital Legend

Chapter 291 The Bank of England is tied up!
"It's crazy, it's crazy, this trend is really crazy."

Seeing the sudden plunge in the pound sterling exchange rate, countless aggressive day traders who had been long on their positions were forced to stop losses.

As long day traders covered their positions and closed their stops, and as the main short-selling institutions suppressed the huge amount of short orders, many day traders who followed the trend and went short quickly pursued the short positions... The pound exchange rate only paused between 1.5240 and 1.5250 for a dozen seconds, and then plummeted again, continuing to dive rapidly to around 1.5200.

Afterwards, information about the preliminary vote count results in Orkney and the Hebrides spread rapidly.

The long and short forces in the market, as well as the open long and short positions.

Once again, the trend quickly reversed.

"The volatility of the pound tonight is really outrageous."

In just a few minutes, the breakthrough trend organized by the bulls was destroyed and the bears regained the upper hand. At this time, Angus, the risk control monitor of the Risk Control Management Department at FXCM International Headquarters in the Cayman Islands, could not help but exclaimed in surprise.

"Yes!" Hubert, the manager of the risk control department, nodded slightly. "Within a few hours, the floor traders who participated in intraday speculative trading, whether they were long or short, had been harvested several times. The fluctuations were one or two hundred points at a time. The amplitude of the fluctuations was indeed exaggerated."

"The key is to consider the market news. There is no clear expectation about the referendum result tomorrow," Angus said. "It is still difficult for the long and short sides to determine the winner on the market."

"With such a huge number of long and short positions, no one wants to admit defeat until they see the final trump card." Hubert said, "But the market trend is getting more and more intense, and the number of long and short positions accumulated in the market is getting larger and larger, which poses a greater and greater risk control challenge to our company!"

"Looks like everyone has to stay up late tonight." Angus said with a smile.

Hubert nodded slightly: "Anyone involved in foreign exchange trading will probably not be able to sleep tonight."

"Boss, what do you think will be the result of tomorrow's referendum?" Angus thought for a moment and asked, "In which direction do you think the pound sterling exchange rate will eventually break through?"

Hubert said: "From the perspective of the market, the strength and expectations of the bulls are obviously stronger, but the offline market, especially the black market where large-scale transactions are currently taking place, the pound exchange rate has actually shown signs of collapse. Although the trend of the pound exchange rate in the black market is mostly manipulated by a group of powerful Wall Street short-selling capital in the market, this also shows that global capital has made corresponding choices to avoid the uncertainty of the pound exchange rate.

So, if we rely on the offline pound exchange rate trend...

In fact, the current joint force of global capital is actually more inclined towards the short side.

However, there is a huge variable here, so I can’t say for sure which direction the pound exchange rate will go in the end. I can only wait and see.”

"The biggest variable factor that the boss mentioned should be the Bank of England, right?" Angus said.

Hubert nodded slightly and said, "Yes, in the entire battle between the long and short forces, the attitude of the Bank of England and its determination to maintain the exchange rate of the pound are the chips that can determine the outcome of this huge gambling table. However... at present, the Bank of England is obviously still a little hesitant in its determination to maintain the exchange rate of the pound!"

"The Bank of England has already publicly sold $100 billion of its foreign exchange reserves to the market," Angus said. "Can this be considered a lack of determination?"

Hubert responded: "Under normal circumstances, the release of $100 billion in foreign exchange reserves would definitely be enough to stabilize the pound exchange rate, but now... it is a special period, a special time. The release of $100 billion in foreign exchange reserves obviously cannot curb the panic of major global capitals and many multinational trading companies selling pounds.

In fact, I think the Bank of England is aware of the risks in the foreign exchange market at this time.

But in fact, I haven’t made up my mind yet.”

"It's hard to make up your mind!" Angus said, "If the referendum result tomorrow is unexpected and Brexit is successful, then no matter how much US dollar foreign exchange reserves the Bank of England releases to the market tonight, it will be futile to stabilize the pound exchange rate.

Just like the night of the 'Swiss Franc Black Swan' last year.

Almost all capital institutions in the world are waiting for the Swiss National Bank to support the Swiss franc at the 1.0000 mark, increase long orders in the market, and sell off US dollar foreign exchange reserves.

Everyone has set up potential orders in advance, hoping to make the most of the Swiss National Bank.

The Swiss National Bank has also seen this.

Therefore, the plan to support the market was resolutely abandoned, which dashed the expectations of major global capital institutions and even countless speculative traders.

It also caused the Swiss franc exchange rate to plummet by more than 7000 points in an instant.

In fact, looking back.

At that time, the Swiss National Bank gave up the strategy of maintaining the 1.0000 point mark and chose to concentrate funds to enter the market and go long after a large number of latent long positions in the market were liquidated, and then sell off the US dollar foreign exchange reserves to stabilize the exchange rate. This was completely correct.

After all, this can save a lot of money and better accomplish the task of stabilizing the exchange rate.

In fact, although the Swiss franc exchange rate plummeted by more than 7000 points at the time, the next morning, thanks to the quick action of the Swiss National Bank, it recovered to the 1.0000 point mark.

So I think……

If the result of tomorrow's referendum deviates significantly from everyone's expectations.

The Bank of England will probably do the same and will not blindly invest huge amounts of money to stabilize the pound exchange rate above the 1.5000 mark. "

"Well, you're right." Hubert nodded. "So, the most important factor that determines the Bank of England's determination to support the market and maintain the pound's exchange rate is still the result of tomorrow's referendum. As long as the result of tomorrow's referendum is in line with expectations and is the result of continuing to stay in the European Union, the Bank of England can invest a large amount of funds at this position to carry out strong support for the market, helping the main long positions in the market to defeat the short institutions in the market in one fell swoop.

At present, we can also see the attitude of the Bank of England towards market operations.

Let’s see what the referendum results will be tomorrow.”

"As long as the Bank of England continues to increase its long positions and releases US dollar foreign exchange reserves to the market later this evening..." Angus said, "it should mean that the result of tomorrow's referendum is completely certain, right?"

Hubert nodded slightly and said, "That's true." "Then I hope the Bank of England can be more aggressive in its market operations." Angus said, "Among our current client groups, the total positions of the pound exchange rate still show a large number of net long positions. Under this situation, once the extreme market conditions of the pound break out and the direction of the breakthrough is in the short direction... our losses will be even more serious."

"actually……"

Angus paused and continued, "If the Bank of England's operation is confirmed and the result of tomorrow's referendum is roughly determined, I think it would be a good strategy to control risks for our institution to establish corresponding positions to hedge risks."

"There is a lot of smart money in the market. If the referendum result is roughly determined and there are not many variables, the main long and short groups in the market will have responded accordingly." Hubert said, "By then... it will be impossible to do hedging transactions, so this strategy will not work. It is better for everyone to work harder, keep a closer eye on the market, and mark out the risky accounts of customers in advance. This is the best policy."

"Okay." Angus thought about it and could only nod in agreement.

While the two were discussing what kind of response strategy the Bank of England would adopt next, whether it would increase the release of US dollar foreign exchange reserves, and whether it would continue to increase its long positions in the market...

11pm Yanjing time, London, Bank of England headquarters.

As the actual market operation trading room of the Bank of England to maintain the exchange rate of the pound, all traders and department heads are keeping a close eye on the trend of the pound exchange rate, receiving various information from the offline market, and have no intention of resting or sleeping.

Tonight, no one in the entire Bank of England organization can really sleep well.

"Based on the preliminary vote count results disclosed so far, is it still not 100% certain about the result of tomorrow's referendum?"

Bank of England, Office of the Governor, Brian, Governor of the Bank of England, stared at Clement, Director of the Central Bank's Monetary Policy Strategy Department and member of the Central Bank's Committee and asked.

Clement replied: "Due to the unexpected situation of the preliminary counting results in Orkney and the Hebrides, the uncertainty about the result of tomorrow's referendum has indeed become higher, but according to the current preliminary counting results, the probability of continuing to remain in the EU is still as high as more than 80%."

"I don't want 80%, I want 100%." ​​Brian said, "As long as there are unexpected results in the referendum tomorrow, we can't continue to release US dollar foreign exchange reserves to the market on a large scale, nor can we continue to increase our long positions indefinitely.

Because once we fire a large number of bullets in our hands in advance.

And the result is the opposite of what we expected.

As market sentiment accumulates and global capital sells off the pound, we will completely lose the power to maintain the stability of the pound exchange rate."

"Alas, after the Birmingham data came out, things were developing as we expected," said Clement. "Who knew that the preliminary vote counts in Orkney and the Hebrides would be so unexpected and so different from what our government agencies had expected."

"This shows that we still underestimated Salmond's personal influence!" Brian said, "No wonder so many people in the government cabinet dislike this guy, but they can't do anything about him for the time being."

"I always feel that this incident is getting out of everyone's control." Clement said, "Minister Andrew and the Prime Minister, what do you think now?"

Brian said: "Minister Andrew, of course, fully supports us, but the Prime Minister is obviously hesitant. I guess there are many people in the cabinet who want to make our country withdraw from the EU system. Alas... a good strategy is now really limited by the uncertain results."

"We can't help it." Clement sighed helplessly. "We have to take the initiative. When the outcome is uncertain, we can't gamble everything and exhaust the central bank's foreign exchange reserves."

After experiencing the financial crisis in 98.

Now all members of the Bank of England's committee know the consequences of throwing out their trump cards in advance and exhausting their foreign exchange reserves to maintain the pound's exchange rate.

That would only lead to a more aggressive short squeeze from Wall Street capital.

They will only fall to the point where they can be slaughtered at will.

"But if we don't continue to respond, and market news gradually turns to the short side, and Wall Street capital and even global capital continue to squeeze and sell the pound, while continuing to increase short positions in large quantities, leading market sentiment to further turn to the short side..." Clement paused, and then said, "The subsequent situation will become more and more difficult."

Brian rubbed his temple helplessly, paced back and forth in the office, pondered for a while, and said: "There is really no other way. We can only choose the same approach as the Swiss National Bank did in the past. We can verbally call on everyone to go long and maintain the pound market exchange rate. We can also invest appropriately, but it must be controlled within a limit.

If we cannot hold up the market, we will not be able to resolve the current panic of global capital runs and selling of the pound.

It cannot save the confidence of long positions in the market.

Then we can only give up and wait for the referendum result to be announced tomorrow before entering the market to quickly save the exchange rate."

"If we do this..." Clement was shocked when he heard Brian's words, and said, "It would be equivalent to abandoning the large number of capital institutions that are currently long in the market. You should know that the main longs in the market include many of our local banking institutions and investment institutions.

If we give up, we will abandon the current pound exchange rate.

These local financial institutions and investment institutions that have gone long in large quantities probably have no chance to exit safely.

Once Wall Street capital goes all out to sell off the market, it will deliberately create more panic-stricken short-selling sentiment.

Once we give up, the pound exchange rate fluctuates extremely downward, and these banks and investment institutions that are long will most likely not have enough time to close their positions and stop losses.

This will cause many institutions to suffer huge losses.

It will also cause huge losses to our country’s capital and major financial institutions.”

"If we wait a few more hours and still can't be 100% sure of the referendum result tomorrow..." Brian gritted his teeth and said, "Then this is our only choice.

"Well, okay." Clement sighed helplessly and said, "For now, we can only hope that there will be good news in the next few hours. We can only hope that under the current situation, these many long institutions in the market can withstand the continuous selling of Wall Street short capital."

(End of this chapter)