29 Apr 2014
GBP/USD would struggle to advance from current levels - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, underlines the firm tone in the GBP/USD.
Key Quotes
"A 0.9% q/q increase in UK Q1 real GDP would take the annual growth rate to 3.2%, the best since the fourth quarter of 2007, and moving further ahead of the US. Is it priced into the FX market?"
"UK/US 2-year rate differentials have widened by some 30bp over the last year and GBP/USD has gained 10%, while the pound has gained about 2 ½% against the Euro. The rates market now prices about a 50bp rise in rates in the UK over the next year, compared to 25bp in the US."
"I first suggested that the longer-term GBP/USD outlook had turned negative in January, so I was definitely either wrong or early, but I still can't get away from concluding that while the MPC may well hike before the Fed, the market has priced in enough in terms of relative speed of UK vs. US rate hikes. That only means that GBP is going to be more sensitive to any weak."
"/bad news that comes along, than to more ‘good' news however. Today's news will be sterling friendly, and priced in, and therefore should see the pound remains supported but struggle to rally further."
Key Quotes
"A 0.9% q/q increase in UK Q1 real GDP would take the annual growth rate to 3.2%, the best since the fourth quarter of 2007, and moving further ahead of the US. Is it priced into the FX market?"
"UK/US 2-year rate differentials have widened by some 30bp over the last year and GBP/USD has gained 10%, while the pound has gained about 2 ½% against the Euro. The rates market now prices about a 50bp rise in rates in the UK over the next year, compared to 25bp in the US."
"I first suggested that the longer-term GBP/USD outlook had turned negative in January, so I was definitely either wrong or early, but I still can't get away from concluding that while the MPC may well hike before the Fed, the market has priced in enough in terms of relative speed of UK vs. US rate hikes. That only means that GBP is going to be more sensitive to any weak."
"/bad news that comes along, than to more ‘good' news however. Today's news will be sterling friendly, and priced in, and therefore should see the pound remains supported but struggle to rally further."