25 Mar 2015
GBP keeps the negative bias in the short term – JP Morgan
FXStreet (Edinburgh) - In the opinion of analysts at JP Morgan, the outlook for the sterling remains on the bearish side in the run up to the May elections.
Key Quotes
“One contributory factor to the 50-60bp reduction in the Fed’s own rate projections is the tempering effects on growth and inflation of the stronger dollar”.
“The feedback loop from excessive currency appreciation to policy is not confined to the dollar – interest rate expectations are falling in most strong currency countries versus weak currency countries (the main exception is SEK, where the central bank is overtly prioritizing an even weaker currency)”.
“This reappraisal is most pronounced in GBP, where rate expectations have fallen heavily in the past two weeks on: 1) an increased emphasis from the BoE on the currency, 2) a lessening in upward wage pressure, and 3) the comment from BoE chief economist Haldane that rates were as likely to fall as to rise”.
“We increase sterling shorts as this erosion in interest rate support intersects with the May election to undermine sterling’s extremely rich valuations”.
Key Quotes
“One contributory factor to the 50-60bp reduction in the Fed’s own rate projections is the tempering effects on growth and inflation of the stronger dollar”.
“The feedback loop from excessive currency appreciation to policy is not confined to the dollar – interest rate expectations are falling in most strong currency countries versus weak currency countries (the main exception is SEK, where the central bank is overtly prioritizing an even weaker currency)”.
“This reappraisal is most pronounced in GBP, where rate expectations have fallen heavily in the past two weeks on: 1) an increased emphasis from the BoE on the currency, 2) a lessening in upward wage pressure, and 3) the comment from BoE chief economist Haldane that rates were as likely to fall as to rise”.
“We increase sterling shorts as this erosion in interest rate support intersects with the May election to undermine sterling’s extremely rich valuations”.