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11 Feb 2013
Forex Flash: Energy dependence a reason to be a long term GBP/USD bear – Societe Generale
Kit Juckes, Global Head of Currency Strategy at Societe Generale feels that the UK´s energy dependence situation is a good reason for being a long term bear on GBP/USD.
However, Juckes sees more supporting factors on the horizon. Firstly, he notes concern expressed by the fed´s Professor Stein about asset bubbles. Fed hawkes are slowly building influence and a policy rethink may still be months away but will be inevitable in the long run. Secondly, he notes the trend in UK inflation which has been above the MPC´s target since 2009.
He writes, “UK inflation has been above US inflation since October 2008, and that has a bearing on the real exchange rate too. GBP/USD will track EUR/USD, so Euro resilience will support GBP/USD. The pound still looks undervalued on a fundamental basis relative to the Euro. But despite that, short GBP/USD seems a viable long term trade and a better tactical trade than shorting EUR/USD too early. It’s certainly a good way of expressing the shift in relative energy dependence.”
However, Juckes sees more supporting factors on the horizon. Firstly, he notes concern expressed by the fed´s Professor Stein about asset bubbles. Fed hawkes are slowly building influence and a policy rethink may still be months away but will be inevitable in the long run. Secondly, he notes the trend in UK inflation which has been above the MPC´s target since 2009.
He writes, “UK inflation has been above US inflation since October 2008, and that has a bearing on the real exchange rate too. GBP/USD will track EUR/USD, so Euro resilience will support GBP/USD. The pound still looks undervalued on a fundamental basis relative to the Euro. But despite that, short GBP/USD seems a viable long term trade and a better tactical trade than shorting EUR/USD too early. It’s certainly a good way of expressing the shift in relative energy dependence.”