24 Jan 2014
Flash: GBP: hero to zero - HSBC
FXstreet.com (Guatemala) - David Bloom, Global Head of FX Research at HSBC said the market’s love affair with GBP is doomed to fail.
Key Quotes:
“The currency has been the strongest in the world since tapering fears took hold in May 2013, buoyed by a sequence of better than expected UK economic numbers, as data increased its
grip on GBP”.
“However, we are more than happy to retain our substantially below-consensus forecast that GBP-USD will finish 2014 at a lowly 1.50. UK economic forecasts have been revised substantially higher, making it far more difficult for data to over-deliver”.
“Furthermore, in the absence of any productivity-led acceleration in wages, sizeable questions still linger over the sustainability of this economic improvement”.
“But the biggest threat to GBP comes from the UK’s grim visible trade balance which starts this recovery at an already disturbing 6.7% of GDP”.
“The trauma which hit the prominent emerging market deficit currencies, the so-called ‘fragile five’ in 2013 should be a stark warning to GBP”.
“When the market flips from its interest rate fixation to a balance of payments model, we believe it will be a traumatic time for GBP. After all, when intense love affairs suddenly end, it tends to get very unpleasant”.
Key Quotes:
“The currency has been the strongest in the world since tapering fears took hold in May 2013, buoyed by a sequence of better than expected UK economic numbers, as data increased its
grip on GBP”.
“However, we are more than happy to retain our substantially below-consensus forecast that GBP-USD will finish 2014 at a lowly 1.50. UK economic forecasts have been revised substantially higher, making it far more difficult for data to over-deliver”.
“Furthermore, in the absence of any productivity-led acceleration in wages, sizeable questions still linger over the sustainability of this economic improvement”.
“But the biggest threat to GBP comes from the UK’s grim visible trade balance which starts this recovery at an already disturbing 6.7% of GDP”.
“The trauma which hit the prominent emerging market deficit currencies, the so-called ‘fragile five’ in 2013 should be a stark warning to GBP”.
“When the market flips from its interest rate fixation to a balance of payments model, we believe it will be a traumatic time for GBP. After all, when intense love affairs suddenly end, it tends to get very unpleasant”.