Back
16 Mar 2015
Stay short the sterling – JP Morgan
FXStreet (Edinburgh) -Analysts at JP Morgan expect the pound to edge lower in the next periods.
Key Quotes
“Explanations for sterling’s recent impressive outperformance focus on the reverse capital flow dynamic to that which allegedly is propelling the euro lower, namely a flight of fixed income investors away from negative EUR interest rates”.
“The only problem with that as a hypothesis is that the net foreign inflow to Gilts since the ECB went negative in June last year is actually -£5.3bn. Indeed, the trend in foreign demand for Gilts has been resolutely down”.
“Were it not for this week’s labour data we might even be inclined to increase our sterling short; as it is, discretion is advisable since this is the data point with the single greatest potential to move the dial on policy expectations”.
“The last budget of the current government could also provide some temporary support for GBP if Osborne uses a growth windfall to signal a modest lessening in the pace of long term fiscal tightening”.
Key Quotes
“Explanations for sterling’s recent impressive outperformance focus on the reverse capital flow dynamic to that which allegedly is propelling the euro lower, namely a flight of fixed income investors away from negative EUR interest rates”.
“The only problem with that as a hypothesis is that the net foreign inflow to Gilts since the ECB went negative in June last year is actually -£5.3bn. Indeed, the trend in foreign demand for Gilts has been resolutely down”.
“Were it not for this week’s labour data we might even be inclined to increase our sterling short; as it is, discretion is advisable since this is the data point with the single greatest potential to move the dial on policy expectations”.
“The last budget of the current government could also provide some temporary support for GBP if Osborne uses a growth windfall to signal a modest lessening in the pace of long term fiscal tightening”.