British Pound is known to be a stable currency. Great Britain is a strong economy. But, Great Britain was finding it difficult to stay within the tight exchange rate band set by the European Monetary Union (EMU) in the early’90s. One person who made history with options was George Soros who is famously known as the man who broke the Bank of England.

George Soros had this intuition that the Bank of England would be forced to devalue British Pound. So he bought call options on German Marks and put options on British Pound. He made a bet of $10 Billion by leveraging all the assets in his hedge fund.

Bank of England had made a number of public statements regarding its intention of staying within the EMU. However, within a few days of the speculative attack on the British Pound, Bank of England was brought to its knees as it was …

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Nelson Schwartz (HeraldTribune.com): Inside the global gold frenzy, November 8, 2009. Long considered the ultimate refuge for nervous investors, gold has climbed as the dollar has steadily weakened, budget deficits have expanded in the United States and Europe, and central banks have continued to pump trillions of dollars into weak economies, creating fears of another asset bubble that will ultimately pop. “It’s not that gold has changed, but gold buyers have changed,” said Suki Cooper, a precious-metals strategist for Barclays Capital. “It’s a structural shift we’re seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins.”

• William Rees-Mogg (Times Online): Which will come out on top: paper or gold? November

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... at least not yet that is. Let us see how the rest in Europe will fair.

(From Bloomberg)

U.K. gross domestic product unexpectedly dropped in the third quarter as enduring slumps in services, manufacturing and construction kept the economy mired in its longest recession on record.

Gross domestic product dropped 0.4 percent from the previous three months, the Office for National Statistics said today in London. Economists predicted a 0.2 percent increase, according to the median of 33 forecasts in a Bloomberg News survey. The economy has now contracted in six quarters, the most since records began in 1955.

Chancellor of the Exchequer Alistair Darling said this week he will focus on spurring economic growth as he struggles to cement a recovery in time for a general election due by June. Today’s data may add to pressure on Bank of England officials to expand bond purchases at their Nov. 5 decision after

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By Natasha Brereton LONDON -(Dow Jones)- Bank of England Governor Mervyn King said Tuesday that heightened regulation can’t prevent the financial speculation that results in bank failures, and called for a serious review of the structure of the banking sector whose goal would be to eliminate institutions that are too important to fail. In a speech to business people in Scotland, King championed the idea of separating banks’ utility functions as a means of minimizing the government’s effective subsidy of risky activities and reducing the U.K.’s reliance on a small number of very big banks. Turning briefly to the economy, he noted that there was likely to be “significant” fiscal tightening in the years ahead, and stressed the need to boost broad money growth, but gave no clear indication on whether he would favor extending the bank’s bond buying policy. “The sheer creative imagination ...

This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find of interest.

• Evans-Pritchard (Telegraph): German “wise men” fear credit crunch in 2010, October 15, 2009. Germany’s leading institutes have warned that the pace of economic recovery is “unsustainable” and that the country’s banks may face a fresh crisis over the next year as bad debts surface in earnest.

• Lasse Heje Pedersen (NYU Stern School of Business): When everyone runs for the exit, August 2009. The dangers of shouting “fire” in a crowded theater are well understood, but the dangers of rushing to the exit in the financial markets are more complex. Yet, the two events share several features …

• Anthony Bolton (Financial Times): Are developed or emerging markets the future of investing? October 16,

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The Dow Jones industrial average rose 61 points on Thursday as traders reacted to news that retailers last month had their first sales gain in more than a year.  A closely watched gauge of sales at major retailers rose 0.1% in September. Still, most stores posted sales declines -- though smaller than in recent months -- even as their figures are compared with last September when business plummeted as the financial meltdown ballooned.  While still tepid, it was the first monthly rise in the International Council of Shopping Centers-Goldman Sachs tally since July 2008. 

On Thursday, the European Central Bank and Bank of England left interest rates unchanged.  Sentiment also received a boost from domestic corporate borrowing, which rose for the eight straight week. 

The growing optimism surrounding consumer spending, which is crucial for an economic recovery, followed late Wednesday's good results from Alcoa.  The company surprised investors with

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CNN Money is running an interesting feature by David Goldman entitled "10 countries, 10 solutions" which details the particularities of the global economic crisis facing 10 key countries. In typical old-media fashion, the layout makes no sense from a user-friendliness perspective, so I'm going to take significant liberties in reposting their original content. They also have a single table layout of the 10 countries here. Time Warner lawyers, if you're watching this, get your editorial guys to put their content into a more sensible format that doesn't require constant clicking and I won't have to go such lengths to discuss it and in turn will actually drive more traffic to your site. Got that? Good. Now then, first some

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World stocks retreated further from last week’s 11-month high on Monday as lower energy and commodity prices and caution ahead of a Federal Reserve meeting and G20 summit prompted investors to trim risky trades.

Leaders of the Group of 20 meet on Thursday and Friday in Pittsburgh and U.S. President Barack Obama said on Sunday he would push world leaders for a reshaping of the global economy in response to the crisis.

World stocks, measured by MSCI have risen over 26 percent this year, recouping more than half of last year’s losses, underpinned by repeated pledges by G20 policymakers to keep emergency support for the economy in place.

“The market might look slightly overbought near term, but the economy is definitely improving, corporate profits are definitely improving, interest rates are staying low, valuations aren’t expensive,” said Nick Nelson, European equity strategist at UBS. MSCI world equity index <.MIWD00000PUS> fell 0.7 percent, while the

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The dollar rose broadly on Monday, hitting a near two-week high against the yen, as traders trimmed short positions in the U.S. currency following broad losses so far this month.

Against the yen, the dollar rose more than a full percent, after speculative flows pushed it higher in quiet trade in Asia, where markets in Japan, Singapore and other centres were closed for holidays.

In the absence of economic events or data, traders took profits on currencies which have rallied against the dollar, including the euro, up more than 2 percent so far this month.

Analysts said some investors were becoming concerned that short dollar positions were overstretched, suggesting that a near-term correction may be in store.

“There’s already a lot of long euro/dollar positions in the market so it’s difficult to push the pair higher,” said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.

Data from the Commodity Futures Trading Commission showed that currency

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The U.S. dollar steadied on Thursday after sliding to its lowest in almost a year against major currencies this week, but is seen vulnerable to further selling.

The dollar initially fell versus the euro after a better-than-expected reading on U.S. weekly jobless claims but recovered a little groun das U.S. and European stocks failed to extend earlier gains.

The U.S. currency has suffered recently as investors bet on an economic recovery through commodity-linked and higher-yielding currencies, which rallied earlier this week.

“Some caution has returned to the foreign exchange markets today, and the dollar is mixed,” said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank in New York. Still, Bennenbroek warned that Thursday’s rebound in the U.S. currency may be short-lived.

“Dollar sentiment is still fragile, and the path of least resistance for the dollar is still clearly to the downside in the near term,” he said.

In midday trading in New York,

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