21 Jan 2015
Political risks keep GBP weakness underpinned - HSBC
FXStreet (Guatemala) - David Bloom, Global Head of FX Research said that it would be a mistake to become excessively pessimistic on the prospects for GBP.
Key Quotes:
"We have long been among the most bearish of forecasters on GBP/USD and the consensus has been forced into a sequence of catch-up revisions to keep pace with GBP's decline."
"However, having missed out on the move from 1.70 to 1.50, the belated converts to a bearish view on GBP risk becoming over-zealous in projecting ever more dramatic depreciation ahead."
"So far in 2015, temperatures in the UK have already fallen below those prevailing in the foothills of Mount Everest, so it is timely to note that when conditions are at their most frosty, bears should really hibernate."
"Similarly for GBP, the cold winds of cyclical, structural and political challenges are apparent and point to further weakness. But with much of the cyclical threat already in the price of GBP, and continued uncertainty over when the UK's twin deficits may get traction in FX, only political risk remains to drive GBP lower. Even here, the downside will be evident mostly in GBP/USD. With the EUR likely to be as troubled as GBP by the threat of a UK-led challenge to EU harmony, EUR/GBP is forecast to remain broadly unchanged."
Key Quotes:
"We have long been among the most bearish of forecasters on GBP/USD and the consensus has been forced into a sequence of catch-up revisions to keep pace with GBP's decline."
"However, having missed out on the move from 1.70 to 1.50, the belated converts to a bearish view on GBP risk becoming over-zealous in projecting ever more dramatic depreciation ahead."
"So far in 2015, temperatures in the UK have already fallen below those prevailing in the foothills of Mount Everest, so it is timely to note that when conditions are at their most frosty, bears should really hibernate."
"Similarly for GBP, the cold winds of cyclical, structural and political challenges are apparent and point to further weakness. But with much of the cyclical threat already in the price of GBP, and continued uncertainty over when the UK's twin deficits may get traction in FX, only political risk remains to drive GBP lower. Even here, the downside will be evident mostly in GBP/USD. With the EUR likely to be as troubled as GBP by the threat of a UK-led challenge to EU harmony, EUR/GBP is forecast to remain broadly unchanged."