What’s the Reason Behind This Price Movement ?

By | April 1, 2015

I’ve made the case before that trying to provide reason behind this price movement for why a financial instrument (currency pairs, indices etc) moved the way it did in a short period of time is impossible. It could be argued that in certain cases, at best, it’s an educated guess. But most of the time it’s just an exercise in filling up web pages or TV airtime.

You might know that a couple of days ago, on March 30th, 2015, the former Federal Reserve chairman, Ben Bernanke, started his own blog. As it happens, on that day we also had a seven-year high in Chinese stocks and a rally in US stocks – 1.5% for the Dow and more than 1% for S&P 500 and NASDAQ. There was a very funny tweet in my twitter feed that perfectly mocks this attempt to always find explanations for price moves:

 ·  Mar 30 “Stocks soar on Bernanke’s first blog post”
What made me harp on this subject again is a title I noticed on ForexLive: ‘ForexLive European morning wrap: Pound takes another beating as UK election fears prevail ‘. Of course, that’s just an unsubstantiated argument, just as good as any other – why didn’t the election fears prevail yesterday or the day before? What made them prevail exactly this morning?
In the spirit of the tweet above, I will give you the real reason why the pound fell today: traders and investors got spooked by the following headline, right at the top of today’s DailyMail online edition:
Britain’s most shameless dad: Man has 40 children by 20 women – and can’t remember all of their names – says: ‘I’ll never stop because God says go forth and multiply’
I invite the editors from ForexLive to prove me wrong. :)